Managerial Economics - Oligopoly Essay Example | Topics and Well Written Essays - 1250 words

Managerial Economics - Oligopoly - Essay Example This act of Holland Sweetener amounted to an attempt to dilute the monopoly and convert the US market into an oligopoly comprised of two major suppliers of Aspartame. In order to do this the major issue presented in the case study is that of pricing. Strategic pricing in order to win the major buyers so as to capture market share and maximize profits. Given the usual assumptions of an identical product, identical costs and the Bertrand variety of oligopoly in which the both Monsanto and Holland Sweetener simultaneously decide to quote the price either as high or low to Coke and Pepsi. Due to interdependence of the two sellers it becomes very important for each firm to decide strategically whether to quote a low or a high price. In Bertrand oligopoly strategy reduces to simultaneously setting prices in the hope that the competition does not change its set price. Such conflicting or non cooperating pricing strategies are increasingly being dealt with the constructs in Game Theory which not only introduced the idea that conflict could be mathematically analyzed but also provided the terminology with which to do it. Rasmussen (2001) traces the beginning of the theoretical development in field by quoting the relevant literature and by stating that the evolution of the arguments around the "Prisoner's Dilemma" construct (as in Tucker) and thereafter Nash's papers on the definition and existence of equilibrium further developed the field of the modern non-cooperative game theory. However important and simultaneous developments were taking place in cooperative game theory through the important contributions of Nash and Shapley on bargaining games and Gillies and Shapley on the core theory utilized in study of cartels. These developments are traced in several books on economics and Game Theory. (Thus if each firm acts independently, the result is a Nash equilibrium. Part of the definition of Nash equilibrium is that each player takes what the other players are doing as given when deciding what he should do; he holds their behavior constant and adjusts his to maximize his gains. But if one firm increases its output, the other firms must adjust whether they choose to or not. If they continue to charge the same price, they will find that they are selling less; if they continue to produce the same amount, the price they can sell it for will fall. The pay-off matrix from the case study can be given as in Table 1 below: Table 1: Pay-off Matrix of Monsanto and Holland Sweetener In this table Monsanto is represented as Player 1 and Holland Sweetener as the player 2.As per the assumptions the payoff have been categorized in various cells of the matrix. Player 1- Monsanto (Figures in $ Millions) Player 2- Holland SweetenerAn examination of the Table 1 reveals that following an independent strategy of pricing high Monsanto is likely to gain $300 million if Holland also priced high.However, its payoffs would plummet to $0 millions if

Compare a modern (post mechanistic) management accounting technique Essay

Compare a modern (post mechanistic) management accounting technique with a traditional technique which has the same (or similar) objectives - Essay Example Management accounting deals with presentation of accounting information which assists the management of a business to come up with policies and also to facilitate the management in it normal activities (Bhattacharyya, 2011, p. 1). It is a process that involves identification, measurement, accumulation analysis, interpretation and communication of financial information that helps to facilitate planning, evaluating and controlling the activities and accountability of resources (Thukaram Rao, 2003, p. 1). For a long time, strategic management accounting was considered as a possible area of development that would boost the future contribution of management accounting. In the 1980, the United Kingdom Chartered Institute of Management Accountants ordered an inquiry that was to review the current state of the development of management accounting. The findings were consequently published in a report entitled Management Accounting: Evolution and Revolution which drew attention to strategic management accounting as an area for future development (Drury, 2008, p. 570). There are a number of new techniques that have been introduced that are aimed at making management accounting more relevant to the production methods that are used in the modern world. This management accounting methods include; strategy management accounting, life cycle costing, target costing and Kaizen among others (Collier and Agyei-Ampomah, 2008, p. 50). The traditional focus of management accounting was on the period after the product had passed the design and development stage and has gone into production so that it can be taken to the market for the consumers to buy (Collier and Agyei-Ampomah, 2008, p. 51). In traditional management accounting, the control procedures focused mainly on the manufacturing stage of the whole life associated with a product. Cost that were realized