The Brand Economics Study On Market Structure

By researching of distribution trait of manufacturer scale, conduct and interaction between them, market structure is one of the key elements of theory of modern industrial organization. From the theory of derived structure, theory of performance determine and theory of behavior determine, all the major economic schools including the Harvard School, Chicago School focused on market structure from a firm perspective, resulting in not giving satisfactory Interpretation for the formation of the market structure. In this paper, the framework for the analysis of brand economics paradigm, the perspective of the study from manufacturers to consumers, from the perspective of consumer choice behavior of the market structure of decision problems for the first time. In excess supply of economic conditions, regardless of changes in market share or competitive relationship with each other, the ultimate factor is determined by consumer's choice. Therefore, the in-depth study of the characteristics of consumer choice behavior, and the resulting brand formed by the mechanism to explain the market structure has become a more realistic form of economic analysis path. The purpose of this paper is:the brand economic analysis of market structure.First, this paper analyzes market structure theory and its driving and evolution factors to define research position of the theoretical framework. It is found:the motivation of industrial economics and market structure theory is from method development and theoretical innovation. Application of new analytical tools and study expansion of different economic schools are the concrete performance. From an economic view, large numbers of brand phenomenon appear in market economy, brand strategy has become one of the main strategic behaviors of competitive manufacturers and an independent factor which consumers chose out of the price. Therefore, introducing brand and broaden market structure theory maybe a new source of market structure innovation.Secondly, for the description of market structure measuring, this paper proposes a "brand concentration" concept. In the real economy, consumers choose the brand rather than manufacturers. For example:a bottle of shampoo that the consumer chose was to meet remove debris, not for P & G company. Therefore, the traditional market concentration as unit of manufacture to measure its scale, distribution trait, etc., just to illustrate the industry production status, but can not reveal the true competition situation on the basis of consumer's choice, and can not even explain formation and evolution of the market structure on brand basis. This is defects of structuralism most be criticized. This paper constructs a simple model of concentration as a measure of market structure through brand demand function. Using a single brand market share as basic indicators, a variety of products or category of sales percentage as weight, and the first few (usually top four) brand Market share as weight to come to the market concentration. Brand concentration, not only illustrate the brand's position in the market and the strength of market power, but also reflects the brand strategy in different sub-markets which complies with the general rules of consumer choice. This paper shows that:Based on different product life cycle, the size of product-type market increases higher, one or several brands of market share are grater, the higher degree of brand concentration. Conversely, brand concentration is smaller.Third, this paper studies elasticity of consumer brand choice price during different options in different conditions. The classical demand function theory shows that price is the major factor to determine a commodity demand (self price), and other commodity prices (cross price) and consumer's disposable income. In general, the greater the brand market share is, the smaller the demand price elasticity is. This paper confirms that:when a brand in a particular type of product on the market, the cost of consumer choice approaches zero, mainly for the larger market share results in increasing in larger chain market share, the brand The product-based brands on the market the greater the price elasticity of demand. Conversely, the brand demand price elasticity is smaller. It shows that the brand mechanism plays a role of consumer choice constraints and also explains the prerequisite for price mechanism is zero of choice costs.Fourth, the paper figures out that brand competition does not exist in all markets and product range expansion, different brands or same brand groups are as much as possible to expand the market share in one market Interval through different brand strategies and pricing strategies. Based on this point, this paper introduces the concept of brand diversification degree to illustrate the market structure evolution. In the process of expansion of market scale and product range, a single brand expansion will increase the selection cost of consumers. Therefore, brand diversification has become an inevitable result of competition. This study indicates that the main causes of brand diversification are lack of market power, competitive effects and market expansion of existing brands. Brand diversification accompanied by a decline in market concentration, market structure thus will generally be loose.Fifth, this paper puts forward a concept of brand barriers based on brand symmetric advantage. Entry barrier is one of important decision factors to market structure. High concentration is a necessary but not sufficient condition to maintain the market power of manufactures. As Paul Samuelson pointed out if the potential supply was large enough the high concentration does not mean monopoly. In traditional industrial organization theory, scale economies, product differentiation are considered the main determinants to entry brand barriers. This paper finds out:scale economies and high concentration can not bring with high entry barriers. Consumer's continuous selection to the existing brand is one way to reduce the selection costs because of consumption habits and brand recognition, therefore, to potential entrants, the existing brand is of a lower conversion costs. Accordingly, low conversion cost means lower choice costs, so consumers will try a new brand with low cost when selection cost of existing brand is high, the brand can easily enter the market.The main contributions of this paper are:(1) Study the formation and evolution of market structure from the view of consumers for the first time. The originality of brand economics is to open the "black box" of consumer Choice Behavior, and describe it through "choice costs". Based on the analysis of brand economics, it has given a new measurement for the brands distribution -objects of consumer choice; investigating the mechanism of constraining consumer choice and the way of their selection behavior (the price mechanism, the brand mechanism). Driven by competition, the market continues to divide into segments. In this paper, brand and product diversification phenomenon on market has been studied; for competition between existing brands and potential entrants, it analyzes the relationship of selection cost and brand asymmetric advantage, and puts forward the concept of brand barriers. (2) The application of analytical framework, basic concepts, theoretical ideas in this paper are all built on the existing achievements of theory of brand economics, reflecting the good nature of inheritance and development of researching. This paper introduces the brand elements to the analysis of market structure for a more completed analysis framework which specific brand economic theory applied to different industries.Throughout the whole paper, different from the traditional theory of industrial organization analysis of market structures, which is not the static starting point for structure and the product between firms. This paper concluded that the market structure is the result of consumer choice, the lower choice cost, the higher brand credibility, and the brand's market share is greater, barrier to its brand is higher. Accordingly, the brand concentration is higher.