MICROECONOMICS presentation Essay Example | Topics and Well Written Essays - 750 words

MICROECONOMICS presentation - Essay ExampleBarriers to Entry. The airline industry blend ins in a highly dynamic environment and is affected not only by the legal, techno limpid and scotch environment but also by the global environment. Government restrictions and high degree of competition scrap as entry barriers in the airline industry. However the biggest entry barrier is the gargantuan price knotted in setting up and running the business. The acquisition of aircrafts, implementation of adequate security measures, deployment of skilled custody and rendering the desired level of customer service entail huge financial resources. The high cost of entry however does not deter organizations with sound business models and adequate financial resources to enter the business. The Australian domestic airline industry, after its deregulation in 1990, has seen the entry of many players each catering to contrasting customer segments. There have been sign of the zodiacs that have flouri shed (Virgin Australian Airlines) and thither have been levels that have perished (Ansett Australia). Competitive strategies. In addition to the general business environment, companies argon also affected by the competitive strategies adopted by rival firms. ... An example of the differentiation could be an airline (Qantas) which provides bells and whistles in its service and charges a high price. Likewise, there could be an early(a) airline (Tiger Airways) with a no frills service. It is important to note here that these two airlines are targeting distinct customer segments. As such, the high price charged by the airline offering time value added services (e.g. in-flight entertainment, free wine) in addition to the core service of transportation does not induce the another(prenominal) airline, which offers trimmed down services, to increase the price. Game Theory. There may be instances where more than one firm is competing for the same target market for e.g. two airlines (Jetst ar and Tiger Airways) trying to capture the price-sensitive customer. The competitive strategies employed by one firm and reactions thereof by the other firm are best understood with the attend of the game theory. In the world of business game theory finds applications in research and development expenditure, pricing, brisk product introduction, strikes, negotiations etc. A managers decision in each of these settings depends on the decisions that other players in the industry will take. As such, the payoffs in these setting can said to be interdependent. In the discussion about the airline industry, one may fathom three different outcomes co-operative game, non co-operative game and a situation of no interdependence. The airline may get together and form a cartel (cooperative game) and operate as if they were a monopoly. In such a case the dominant strategy of each firm would be high price and neither would be compelled to reduce the price because of the implicit co-operation. Thi s is the most logical game when the industry