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Question:

Discuss about the Economic Efficiency.
 
 

Answer:

Imperfect Competition and Oligopoly Efficiency.

Primarily, oligopoly is associated with dynamic efficiency due to the inherent entry barriers thus limited output influencing maximum returns. Consequently, the assurance of profits due to entry barriers has boosted research and development ventures hence significant technological advancement translating into quality products at low prices and high output levels according to Galbraith-Schumpter (Ebrary, n.d.)Noteworthy, productive efficiency is unachievable in oligopolistic firms. Moreover, the close nature of oligopolistic firms to monopolistic firms makes it equally less efficient economically.

Predominantly, under imperfect competition, there’s no allocate efficiency due to the excessive marginal cost caused by price way above marginal revenue .Also, productive efficiency is unattainable under these conditions because of low output  by firms. Market share and concentration is triggered by efficiency. Notably, Samsung s market concentration is 41.6% of the world wide Dynamic random access memory chart. Further, Samsung Smartphone Company has made efforts to differentiate its product from other smartphones through its feature interface.

Source: IHIS isuppli Research, 2011

Notably, the concept of efficiency compares observed and optimal values of output and input of a production unit. Predominantly, perfectly competitive markets are considered more efficient than monopolistic competitive markets. In a monopolistic competitive structure, profit maximization happens when the value of marginal revenue is the same as marginal cost thus making output level lower than that of a perfectly competitive market. Further, firms will undersupply in this market structure.Noteworthy,the inefficiency in monopolistic competitive firms can be attributed to high prices set above marginal cost thus making these firms productively inefficient.

Further, monopolistic competitive market is allocatively inefficient due to excess price of goods attributed to the excessive marginal cost. Efficiency could be technical,productive,dynamic,allocateve and economic.Notably,perfect competitive markets are likely to record high  productive  and allocative efficiency rates  due  to long term average cost curve as compared to monopoly and Oligopoly. Monopolies do set their prices at P which is greater than the marginal cost thus making it allocatively inefficient. Notably, allocative efficiency happens when MC cuts the demand curve making price equal to MC.


Conclusively, Samsung is an oligopoly due to the existence of other firms such as Nokia, Apple among others (Loong, 2013) Further, there is product differentiation between the smartphone features produced by the different manufacturers. Moreover, there are entry barriers into the smartphone industry characterized by patents and economies of scale. Further, there’s a strategic behavioral pattern and interdependence among the smartphone companies like Apple and Samsung. However, Samsung can be considered a monopolistic competitive firm due to the substantial number of other smartphone suppliers.

However, Samsung could be considered a monopolistic due to its 57% market share (Loong, 2013) Notably, Samsung and Apple active competition has made them price makers rather than takers thus recording monopolistic profits.Primarily,Samsung has a larger market share as compared to other providers like Apple,HTC and Blackberry(Loong,2013)Notably, monopolistic competitive firms relative efficiency is based on market forces because they are the price setters of their products.Further,productive efficiency in a monopolistic competitive market depends on resource utilization.

In addition, allocative efficiency depends on the equality of the firms marginal cost and revenue. In addition, efficiency depends on market share and concentration of the firm in question (Gambau and Maudos 2000)

 

References

Boundless. Monopolistic competitive markets are never efficient in any economic sense of the term. Boundless. [Online]Available at https://www.boundless.com/economics/textbooks/boundless-economics-textbook/monopolistic-competition-12/monopolistic-competition-75/efficiency-of-monopolistic-competition-286-12383/[Accessed 4 May 2017]

Ebrary. (n.d)Principles of Economic Theory: Economic efficiency Oligopoly.Ebrary.net. [Online]Available at https://ebrary.net/6684/economic_theory/economic_efficiency_oligopoly[Accessed 4 May 2017]

Gumbau, M and Maudos, J. (2000) Profitability, Market structure and Efficiency: An application to the Spanish Industry.UV.ES. [Online]Available at https://www.uv.es/maudosj/publicaciones/ec00-05%20.pdf[Accessed 4 May 2017]

Loong, E. (2013) An economic Analysis on Samsung. Microeconomics [Online] Available athttps://econsbyesther.blogspot.co.ke/2013/10/samsung-at-its-peak-in-smartphone.html[Accessed 4 May 2017]

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