Phase4 IP Market Structure and Firm Strategy - Essay Example

In this market, the price elasticity of demand is inelastic. This means, demand remains relatively unchanged with changes in price. This characterizes a monopolistic competition market structure. According to Boyes and Melvin (2013), this market structure is characterized by a downward slopping demand curve. Product differentiation largely influences demand elasticity such that the greater the differentiation, the more inelastic the demand elasticity. Therefore, Justcookbooks.com ventured into this highly differentiated market that makes it a mini-monopoly, hence the inelasticity of demand would see the demand for its cookbooks minimally affected by changes in pricing as it establishes itself in the market.

Success in this market would therefore be guaranteed by seeking greater differentiation of the online cookbooks. With the argument by Schotter (2009) that greater differentiation causes greater inelasticity, greater differentiation at Justcookbooks.com would cause demand to remain unaffected by changes in pricing, hence consistent quantity demanded. For Justcookbooks.com, pricing with different types of customers and asymmetric information would be most appropriate. According to Arnold (2013), this strategy involves charging less cost per unit for those who buy more and a higher cost per unit for those buying less.

Using this strategy, Justcookbooks.com would encourage purchases of high volumes which increase revenue and thus