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Untitled Prezi

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nazirah mohd

on 12 December 2012

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Introduction Oligopoly: Only a few firms that account for most or all of total production. Leading mobile communication service provider in Malaysia Maxis Communication Berhad 11.4 million mobile subscribers Founder of Maxis Ananda Krishnan (The richest man in Malaysia) Maxis products and services -Maxis Internet
-Maxis Mobile Internet
-International Roaming
-Switch to Maxis
-Maxis Rewards
-Maxis Supplementary Tracker
-Maxis Formula1 2012 Oligopoly Major Cellular Communication Companies in Malaysia Maxis Celcom Digi Characteristics of Maxis as an Oligopolistic Firm Examples of effective advertising: -High entry barriers because of government licensing restrictions. Maxis can earn substantial profits over the long run.

-High exit barriers due to huge capital investments (sunk costs). These barriers may discourage entry by new firms.

-However, there are only 3 main cellular communication firms, so Maxis must carefully consider how its actions will affect its rivals, and how its rivals are likely to react. -Maxis knows that price war will actually lead to lower profits in the long run, therefore it prefers to engage in non-price competition such as effective advertising & branding.

-Maxis is known for its unique and fun advertising.

-This form of strategy is difficult to be modeled by its rivals. For price-cutting, there is a limit, as further cut will entail firms to losses. -Maxis applies the Nash Equilibrium principle. It will do the best it can, given what its competitors are doing. This means Maxis assumes that these competitors will do the best they can, given what Maxis is doing.

-Important because the competition among the three major cellular communication companies is very aggressive.

-Maxis must try to capture as many subscribers as possible to gain the highest revenue market share.
Tying -Tying is a general term that refers to any requirement that products be bought or sold in some combination.

-Pure bundling is a common form of tying, but tying can also take other form.

-It is the practice of requiring a customer to purchase one good in order to purchase another. Customer who buys the first product is also required to buy the secondary product. This requirement is usually imposed through contract.
They are 2 examples concerning Tying: iPhone Wireless broadband iPhone -Maxis require its customer to use their service in order to purchase iPhone from their company.

-They have to buy maxis’ number in order to purchase the iPhone.

-Thus the product is tied to the service.
Wireless broadband -The customer has to buy the modem and sim card to enable them to use the service.

-Thus, in order to purchase the wireless broadband, the customer has to have both product, the modem and the sim card, without one of the product there will not be any internet access.
Price Discrimination Second-degree price discrimination Block pricing

-Practice of charging different prices
per unit different quantities.
-Economies of scale
-Average and marginal cost are declining
-Consumers better off by expanding output and lowering
cost Rationally, Third-Degree Price Discrimination Third-degree price discrimination occurs if a seller charges different prices to two or more different buying groups with different demand elasticities. 
is linked directly to consumers’ willingness and ability to pay for a good or service. It means that the prices charged may bear little or no relation to the cost of production.
Maxis charges diverse charges for peak and off-peak times to maxis and other local operators.
Maxis separated prices by time into a peak market with elastic demand, and an off-peak market with inelastic demand.
The demand and marginal revenue curves for the peak market and off peak markets are labelled A and B respectively.
Assuming a constant marginal cost for supplying to each group of consumers, the firm aims to charge a profit maximising price to each group.
In the peak market the firm will produce where MRa = MC and charge price Pa, and in the off-peak market the firm will produce where MRb = MC and charge price Pb.
Consumers with an inelastic demand for the product will pay a higher price (Pb) than those with an elastic demand who will be charged Pa.

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