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Market Structure of the Life Insurance Industry

MarketStructure of the Life Insurance Industry

MarketStructure of the Life Insurance Industry

Thediscussion is about the characteristics of market structures. Focushas been placed on the life insurance sector of the United States.The sector has several companies that offer life insurance servicesto Americans.

Characteristicsof Market Structure

Defining Characteristicsof Market Structure

Economists’ Model of [Oligopoly]

Real-World Example: [Life Insurance]

Number of Firms

Many firms

Hundreds of insurance firms

Control Over Price

Less

Firms set prices

Product Differences

Available

Differences in brands and fees

Barriers to Entry

Few

Government regulation

Competitivenessof the Industries

Name of Firm and Industry

Team’s Consensus Ranking

Teammate’s Name and Ranking

Teammate’s Name and Ranking

Teammate’s Name and Ranking

Teammate’s Name and Ranking

Teammate’s Name and Ranking

AT&ampT, Telecommunication Industry

1

1

3

2

1

3

Airbnb,

Life Insurance Industry

2

3

2

3

4

2

General Motors, Automobile

4

4

1

1

3

1

Virgin America, Airline

3

2

4

4

2

4

Characteristicsof Market Structure

Themarket structure has four main characteristics. These are monopoly,oligopoly, monopolistic competition, and perfect competition. Inmonopolistic competition, the firms produce and sell services andproducts that are differentiated through branding. The automobilemarket in the United States has monopolistic competition becauseautomobile manufacturers are differentiated by brands for example,General Motors and Ford.

Oligopolyis a type of market structure that is controlled by several firms.These firms are small in size, but together, they control a hugeproportion of the market. The tourism industry has oligopolystructure because it has several small firms that offer hotel andtour services across the United States.

Monopolyis a market structure that has only one supplier of goods andservices. There is also the case of natural monopoly where a companycan satisfy the demand of an entire market at lower costs. Microsoftis an example of a company that provides software solutions. TheMicrosoft Office product is used in almost every home and office inAmerica.

Perfectcompetition entails a theoretical market structure that has fewerbarriers to entry, similar products, and an unlimited number of firmsand consumers. The United States does not have perfect competitionmarket because firms differentiate their products using brands,quality, and pricing.

Itis important for businesses to understand the market structure.Market characteristics enable firms to provide high-quality productsand services to customers at an affordable cost. The oligopoly natureof the life insurance industry enables the companies to developproducts that meet the interests of the clients.

Reference

EconomicOnline. (2016). Market structures. Retrieved fromhttp://www.economicsonline.co.uk/Business_economics/Competition_and_market_structures.html