Economics for the Global Service Industry Assignment Sample
CRITICAL EVALUATION OF THE NATURE AND ATTRIBUTES OF DIFFERENT MARKET STRUCTURES AND SUGGESTION OF MODELS FOR FORECASTING OF THE INTERNATIONAL TOURISM ARRIVALS
Introduction
The economy is the fundamental driving force of a nation. The world moves around sustaining a better economy. If there is a fall in the economic strength of a country, it loses its potential to compete with other countries. Hence, economics has been a study area and interest to many business professionals. After the impact of the global pandemic, the economies of various countries were hindered (Bai et al. 2021). This gives a chance to explore the various kinds of market structure in order to understand its role in shaping the economic strength of a nation. This report will be helpful in evaluating the various market structures, economies and models related to the modern day economy.
Question 1
According to Kornienko and Kugai (2019), “market in economics” can be defined as exchanging products and services when the buyers and sellers come in contact with each other. This can be achieved either through mediating agents or directly. In other words, Markets constitute places where things are purchased and sold in the most practical and significant sense. In the contemporary economic structure, the marketplace is no longer a physical location; it has embraced the entire geographic region wherein vendors compete for clients. Economists define the market as “any territory wherein purchasers are indeed in open communication with themselves such that values of similar items tend to equalise readily and fast.”
On the contrary, it is opined by Maisyarah (2018) that there are four categories which constitute the market structure. Each has different attributes and ways of operating the market. They are “perfect competition, monopolistic competition, oligopoly, and monopoly”. In the perfect competition, many sellers sell their products in the market. This feature is also similar to monopolistic competition. However, few sellers exist in the oligopoly market and one seller in the monopoly market.
As viewed by Thisse and Ushchev (2018), in a perfectly competitive world, the number of differentiated products, the manufacturer’s bargaining power, the obstacles to the entrance for big manufacturers, and the quantity of non-price rivalry, for example, promotion are indeed minimal. However, these aspects used to vary in the other three markets. This tendency tends to be moderate in the monopolistic competition, strong in the oligopoly market and highest in the monopoly competition. The quantity of products sold in the market generally remains the largest, and price of the products tends to be low since it is dependent on the factors, for instance, the elasticity of the demanded return to scale protocols that tend to lower the marginal cost of the products. However, in the other three competitions, manufacturers seek to distinguish their goods so that they would be able to charge higher rates (Jena et al. 2018). Monopolies sell fewer items for a greater price. Becoming a stakeholder of monopolistic businesses with enormous advantages and significant earnings rewards investors Competitive businesses do not make money. There might be marketplace remuneration for the leasing of assets and managerial activities; there’ll be no additional profits due to the lack of a significant profit margin. While enterprises in any marketing environment can make financial profitability, the more efficient the business is, as well as smaller the entrants are, the quicker the increased revenue evaporates. Throughout the long term, new competitors reduce earnings and drive out the lowest enterprises (Jena et al. 2018). The significance of the leading sector distinguishes it from oligopolistic. To have a competitive edge, businesses might alter the company’s pricing, volume, reliability, and advertising. Numerous kinds of balance, including the demand curve and others, affect the possibility of economic profit. Market dominance is difficult to assess. In a perfect world, econometric values of customer and supplier elasticity are computed. Nevertheless, authorities and analysts frequently adopt simpler metrics due to a shortage of precise data due to changes in permeability over time.
Question 2
Assumptions are made from the economic perspective for economists to understand the market scenario. The assumptions are made by economists to understand the relationship between the producers and the consumers and the behaviour of the business that exists in multiple scenarios (Ndlovu et al. 2019). The assumptions made by the economic experts help business professionals to evaluate how the economy works and how they can grow more competent from financial perspectives.
It is seen that the assumptions are made on grounds of one simple fundamental concept. It is the availability of the resources in the market. If there are available resources and there is no demand, the price of the commodities drop. On the contrary, if there are less available resources and high demand from the consumer’s end, the price gradually increases. This concept is used by economists to determine many scenarios that may exist in the economic market. There are different types of markets that exist. They are “perfect competition”, “monopoly”, “monopolistic competition” and “oligopoly” (Ndlovu et al. 2019).
In perfect competition, there are sellers and buyers at the same time and all the sellers are smaller and no specific seller has a dominance. On the other hand, monopoly is the market condition where there is a single seller who dominates the market and the customers have no choice but to pay the desired price to the buyer (Kumar and Stauvermann, 2022). A market changes from perfect competition to monopoly when there is sudden mishap and most of the sellers face huge losses while one among them survives a crisis. The assumption varies as economists claim that a perfect competition can not shift into monopoly. However, after the global pandemic it was seen that many companies have suffered huge losses while the pharmaceutical companies have gained heavily. Hence, there was variation in the theory. A monopolistic competition is a situation of the economic market where there are larger numbers of sellers and buyers but all the sellers do not sell the same product. They sell similar products and it is upto the preference of the customers which seller to choose over others. Now a market changes from monopoly to monopolistic competition when new sellers emerge with great potential (Lipsey and Eaton, 2022). The customers find options for a specific product which was not possible earlier. Hence it can be concluded that the assumptions made by the economists are subjected to change based on various factors. Any crisis can induce change. The crisis can be in the form of pandemics or war or emergency.
Question 3
According to Sandholm (2020), game theory can be defined as an analysis of where humans act in strategic circumstances. In the strategic context it implies a scenario wherein every individual should evaluate whether others might react to their actions when making decisions. Enterprises in the oligopoly market are interdependent and their judgement about what to manufacture are influenced by themselves as well as by the choices of certain other enterprises (Roljić, 2018). In such scenarios game theory provides a valuable approach for considering how organisations might operate in this dependency. This theory is usable in describing the situation wherein each actor in the market could react to their actions before making any decision for any action. Game theory, as instance, may illustrate whether oligopolies struggle to preserve antitrust agreements in order to earn pricing power (Adler et al. 2021). While cooperation would benefit businesses as a whole, each company has a tremendous incentive to deceive and undermine rivals in terms of selling. Since this motive to quit is so great, companies may be reluctant entering into something of an anticompetitive pact when they believe they can adequately penalise opponents. Soft drinks companies are the prime examples of the game theory approach. Two competitors such as Pepsi and Coca-Cola are the competitors in the oligopoly market. They have a strong competition since they persist in terms of competitive threat (Jin, 2022).
Given the homogeneity of the competing goods inside the soft drinks market which refers to multiple kinds of soda, whatever price variation on the behalf of its one rival is considered as a breach of the existing neoliberal consensus (Adler et al. 2021). There are several conceivable responses and consequences in a certain circumstance. When Coca-Cola lowers its pricing, Pepsi might follow suit to avoid losing customers. Rebellion is a fault state in this case. That would be to suggest, both corporations are expected to face lower yields as a result of Coca-initial Cola’s price decrease (treachery of the current system). Pepsi, on either hand, might retain the pricing structure despite Coca-deviation, Cola’s giving up some of the slack to Coca-Cola while keeping the pricing structure (Jin, 2022). Any break from competitive practices may lead to lower profitability or customer base. On the other hand, Strategic domination is a phase within game theory wherein a person’s strategy produces superior results for them rather than different methods, which is called payoff matrices. This refers to the fact that one strategy does not affect the other one. One will do what it wants to (Jin, 2022). For instance, Coke is stronger off promoting while Pepsi doesn’t really market, and vice versa when Pepsi promotes. This implies that, regardless of what Pepsi achieves, Coke would be better off promoting, therefore it would (Jin, 2022). A completely dominant strategy would be one where one performs just one thing regardless of what a certain side does. This signifies that one method outperforms anything else in the competition, and others will opt for it.
Question 4
According to Hanck et al. (2019), Econometrics can be defined as a part of statistics that studies, explains, and measures correlation in the financial system by combining quantitative frameworks with economic ideas. With the help of economic metrics, the formulation of hypotheses and descriptive analysis of the dataset becomes possible. Undoubtedly, there is no single method which is usable in forecasting the variables affected. However, the choice of forecasting depends on the factors, for instance, availability of data, measuring tools and others. The covid-19 has changed the scenario of the world. From the normal living to the business sectors, all are severely impacted. Considering the sectors such as hospitality, planning industry as well as the tourism industry, these are adversely impacted too. When social alienation rules were adopted in the crisis, there had been a considerable drop in tourist numbers, lowering overall travel costs and earnings at the site of the resort. Tourism appears to be especially prone to health problems (Turtureanu et al. 2022).
The fact because tourism relies on immediate communication getting formed just at time of consumption makes projecting tourists in an epidemic difficult. In the marketplace, the customer purchasing a tour package is confronted with a slew of unknowns and even bigger dangers that only occur through tourist activities.
Any approach to predict visitor experience must take into account two key factors in passenger circulation: periodicity and motivations. Needs, emotions, goals, ideals, and unique dispositions are all examples of travel motivations, and they all get a human element. For forecasting the tourism visitors rate mean, median and mode for tourism in Romania, descriptive statistics was applied. The ARMA procedure is “used for the correlation determinants of a static auto-regressive-moving overall estimate.” In the average ability and moderate to high phase of a project, several exponential characteristics of these determinants are quantitatively investigated (Turtureanu, et al. 2022). This proposed framework allows to determine the value systems of the visitor arrivals from Romania, that is extremely useful for tourism decision-makers who could then adjust its policies and plans to such predicted results to minimise the impacts of the existing superbug and ambiguity on the Romanian destination image. Forecast would be created unless the expert believes it fits the most stringent conditions. As a result, the automated deployment of ML algorithms is accompanied by an assessment by a study, which confirms the proposed model mechanically.
Conclusion
It can be concluded that the conducted study highlighted the market structure on the international business scenario where it finds different attributes and nature of the market. The four kinds of market are found in the context of buyers and sellers. They were “perfect competition, monopolistic competition, oligopoly, and monopoly”. Further the study has highlighted the significance of the game and with the application of the econometrics, forecasting is achieved for the tourism sector. The study highlighted that forecasting demand in terms of global tourism Expo is essential for bidding as well as ascertaining foreign rivals.
References
Adler, N., Brudner, A. and Proost, S., 2021. A review of transport market modeling using game-theoretic principles. European Journal of Operational Research, 291(3), pp.808-829.
Bai, L., Wei, Y., Wei, G., Li, X. and Zhang, S., 2021. Infectious disease pandemic and permanent volatility of international stock markets: A long-term perspective. Finance research letters, 40, p.101709.
Hanck, C., Arnold, M., Gerber, A. and Schmelzer, M., 2019. Introduction to Econometrics with R. University of Duisburg-Essen, pp.1-9.
Jena, S.K., Sarmah, S.P. and Padhi, S.S., 2018. Impact of government incentive on price competition of closed-loop supply chain systems. INFOR: Information Systems and Operational Research, 56(2), pp.192-224.
Jin, J., 2022, March. The Analysis of the Factors Affecting the Fluctuation of Stock Prices of Coca-cola and Pepsi. In 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022) (pp. 2216-2219). Atlantis Press.
Kononenko, A.I. and Kugai, K., 2019. Competitive market types development and market concept for competitive position formation. Conceptual aspects management of competitiveness the economic entities.
Kumar, R.R. and Stauvermann, P.J., 2022. Imperfect competition, real estate prices and new stylized facts. Journal of Risk and Financial Management, 15(3), p.99.
Lipsey, R.G. and Eaton, B.C., 2022. On the Foundations of Monopolistic Competition and Economic Geography: An Overview. Available at SSRN 4047311.
Maisyarah, R., 2018. Analysis of the Determinants Competition Oligopoly Market Telecommunication Industry in Indonesia. KnE Social Sciences, pp.760-770.
Ndlovu, N., Jiza, A. and Maketa-Kosi, P., 2019. Introduction to Economics (Microeconomics): ECO 121F/L, Degree Examinations November 2019.
Roljić, L., 2018. GAME THEORY IN SALES, RETAILING AND MARKETING PRACTICE. International Journal of Sales, Retailing & Marketing, 7(2).
Sandholm, W.H., 2020. Evolutionary game theory. Complex Social and Behavioral Systems: Game Theory and Agent-Based Models, pp.573-608.
Thisse, J.F. and Ushchev, P., 2018. Monopolistic competition without apology. In Handbook of Game Theory and Industrial Organization, Volume I. Edward Elgar Publishing.
Turtureanu, A.G., Pripoaie, R., Cretu, C.M., Sirbu, C.G., Marinescu, E.Ş., Talaghir, L.G. and Chițu, F., 2022. A Projection Approach of Tourist Circulation under Conditions of Uncertainty. Sustainability, 14(4), p.1964.
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