Assignment Title: Breaking the Gas Station Deadlock

Scenario: You are a business consultant hired by one of the gas station owners involved in the ongoing price war. This destructive price competition is hurting both stations. Your task is to suggest strategies for breaking the stalemate and achieving greater profitability.

Assignment Task:

Write a short report (approximately 1,000 words) analyzing the situation and recommending courses of action. Consider the following areas of focus and research:

• Analyzing the Market:
  
  • Define the concept of an oligopoly. Explain how it applies to the competitive landscape of gas stations.
  • Discuss the barriers to entry for new gas stations in this market (e.g., capital investment, regulations, branding).
• Cooperative Strategies:
  
  • Explain the concept of collusion and the difference between explicit and tacit collusion. Discuss the potential benefits for the gas stations.
  • Research antitrust laws and the consequences of engaging in illegal price-fixing schemes.
• Non-Cooperative Strategies:
  
  • Research game theory strategies like Prisoner's Dilemma and how they can explain the gas station's situation.
  • Discuss the potential for non-pricing competition strategies. Could differentiation in services (convenience store, car wash, etc.) offer a competitive edge?
• Recommendations:
  
  • Present your recommendations to your client (the gas station owner). Your analysis should highlight the risks and potential pitfalls associated with each potential strategy (cooperative and non-cooperative).
  • Include any ethical considerations or long-term consequences for both the competing gas stations and the community they serve.

Additional Prompts

• Include a works cited section in an appropriate format (MLA, APA, etc.).
• If possible, cite examples of other industries, either local or well-known, with oligopolistic structures.

Objectives:

This assignment aims to develop the following skills:

• Understanding oligopoly market structures and their characteristics.
• Analyzing game theory concepts and their applications in strategic decision-making.
• Researching antitrust regulations and their role in maintaining competition.
• Develop strategic recommendations considering both ethical and practical implications.