Project Overview
In this project, you will complete a market structure analysis report for a local city government. This report will consist of two parts. In part one, you will analyze the citys restaurant industry. In part two, you will evaluate the internet market in the city. A market analysis is an important tool to understanding the market conditions that you are working in.
Competency
In this project, you will master the following competency:
Explain how market structure impacts a businesss entry and exit from a market and its ability to generate economic profit
Scenario
Orizont Consulting logo
You work for Orizont Consulting, a small but growing economic consulting firm. Recently, the local city government hired Orizont to help create part of its 10-year economic development plan. The city wants to grow business and increase its tax base. Andreas Schmidt, your manager, has asked you to conduct a market structure analysis report that will inform the citys plan.
Directions
Part 1: Restaurants
In recent years, the city has had an increase in tourism. The city sees this as an opportunity to grow its restaurant market. Currently, there are about 25 restaurants in the city making high economic profit. These restaurants offer different types of cuisine and customer experiences, and sell at a wide variety of price points. The city has a long-term goal of increasing the number of restaurants to 35.
A group of business people discussing a report at a shared work area
First, read the List of Existing Restaurants and the Short-Run Equilibrium Graph documents, which are also linked in the Supporting Materials Section. Use the information from those materials to address the following questions and complete part one of your market structure analysis report:
In the short run:
What is the quantity, price, and profit for an average restaurant?
What is the equilibrium quantity and price for an average restaurant based on the Short-Run Equilibrium Graph?
How much economic profit is made?
In the long run:
How would more restaurants in the city impact the restaurant market?
Will there be entry or exit of restaurants in the market? Why?
How will the economic profit change for restaurants?
How will product choice and prices be impacted?
Strategies
What two strategies could new and existing restaurants use to be successful in this larger market? Think about strategies related to product differentiation, price, and service.
What could existing restaurants do to defend their market share against new restaurants?
What could new restaurants do to be successful in the market?
Part 2: Internet Providers
Your company has identified the need for better high-speed internet services and internet plans for businesses and households of varying sizes. Currently, the city government allows only one internet service provider, but businesses and households have been complaining about high prices, low quality, and poor customer service. For this reason, the city is considering allowing another internet service provider. It is important to note that the current provider is profitable.
For part two of your market analysis, analyze how different market structures affect internet customers in the area. First, read the Internet Providers Overview document, also linked in the Supporting Materials section. Then, address the following:
In this part of your market structure analysis report (600800 words), make sure that you address the following:
Current Market Structure
What is the current market structure of the citys internet market? How does this market structure affect price, quantity, and quality of services?
What is the most applicable market structure? Select one of the four market structures (perfect competition, monopolistic competition, oligopoly, or monopoly). Then, address the following based on your choice:
What are the characteristics of this market structure?
What is the economic outcome of this market structure? Think about the loss to consumers and society.
What are the barriers to entry in the internet market within your selected market structure in this city?
Implications
What are the implications of introducing another internet service provider in this market?
What is the new market structure if another provider is allowed to enter the market? What are the characteristics of the new market structure?
How would you facilitate the entry of another provider in the market? How would this impact price, quantity, quality, and choice?
Using the concept of game theory, what strategic choices could the two providers make?
Government Intervention
Would you recommend allowing another internet service provider into the market? Why or why not?
What kind of government intervention is needed? What specific actions should the government take to achieve its goal?
What to Submit
Every project has a deliverable or deliverables, which are the files that must be submitted before your project can be assessed. For this project, you must submit the following:
Market Structure Analysis Report
