Kasper Pearl Marie Kuyumgyan

What is Kasper pearl ? Monopolistic competition A pearl wholesale company

What are pearls and who buys them? Pearls are formed within a shell of a pearl oyster Scarce homogeneous goods Demand for pearls are inelastic Only rich people buy pearls Veblen good ‘Show off’ good Luxury item

Demand and supply of pearls

Competitors A LOT of similar wholesale market Pearl farmers Especially in Japan where 50% + of the pearls are cultivated Pearl farmers Since there is a large competition… supply will decrease because demand will decrease eq = higher High total cost

Currently At it’s break-even price No profit as total revenue is equal to total cost Large surplus Earns normal profit Since the fixed cost of pearls are very high, the total average cost is high thus, the price of pearls are high which makes the company at its current break –even price

Plan: open different branch in Hong Kong and China Next step Plan: open different branch in Hong Kong and China To increase profit and revenue and should continue to allocate their labor resources in the same way to avoid experience law of diminishing marginal returns and decrease efficiency.

Cons Pros Less overseas air fee Higher total average cost Demand for pearls is higher In Hong Kong no import tax Less overseas air fee Expensive start up cost Higher total average cost (explicit cost)

Product differentiation Appearance Shape, color, material, packaging Service Home delivery, guarantees, assistant, parking Quality Increase or decrease quality Change in market size and consumer taste and preferences Brand reputation/image Advertise by spending money and persuade customers All to target audience, and increase market size

Does not successfully differentiate its goods

Successfully differentiate its goods

Short run/ long run Short run Long run Start up cost Wage for labor Largest amount allocated Staff efficiency Long run Colossal PR work Target audience is different Have to increase market size Gain the consumers trust so they can choose Kasper pearl over the other companies Increase market size

Stakeholders Benefit Potential employees Construction workers China/Hong Kong Government Loss Chinese importer (Middleman) Japanese government Airplane transportation Risk will be that middlemen

All in all… Ceteris paribus, company should consider opening branches in Hong Kong and China, differentiate their goods so the company can lower average cost and profit + revenue will increase.