Dalia's Economic Blog

September 23, 2009

Apple and Market Structure

Filed under: Initiative Blogs — dalia813 @ 7:24 AM

In the article, “In What Type Of Market Does The iPod Operate In?” by Geoff Riley, which can be found in this link http://tutor2u.net/blog/index.php/economics/comments/qa-in-what-type-of-market-does-the-ipod-operate-in, he talks about the market structure of the iPod.


He states that the iPod is a vertical monopoly, whereas the iPhone can be considered an oligopoly. I completely agree that an iPod represents a vertical monopoly. A vertical monopoly is where a single company controls all aspects of the production, distribution, and sale of a product. Though th

e iPod is not a company on its own, the item held a dominant market position.”An important point is that the early generations of the iPod largely created a new market rather than disp

lacing an existing one.” In 2001 before the iPod was released, Apple was practically bankrupt. After the release of the first iPod in 2001, which sold over 100 million units were sold within six years, it was able to return profitability. This was because nothing like the iPod had been made before. It wasnt like a Walkman, large and had the battery life of two hours,  it was small and easy to use.

1apple_ipod_classic_1 By collaborating the iPod with iTunes and the iTunes store in 2003, forced consumers with iPods to use iTunes and the iTunes store as well. Apple was obviously very smart with this. As the iPods improved in quality, more and more people began to use it. With the iPod touch, not only songs and movies where being bought from the iTunes store, but the applications as well. With all of this innovation, the success of the iPod, iPod Shuffle, iTouch, iPod Nano with Apples iTunes software, the iTunes Music Store platform was invincible.

I also agree that the iPhone is an oligopoly. An oligopoly is when the market is dominated by a few number of sellers, thus each is very aware of the other action. I believe this is true for the iPhone because it competes with several large phone companies including Sony Ericson and Nokia. Despite this competition, only one year after the release of the iPhone,  Apple had become the third-largest mobile handset supplier in the world.


One thing I took notice of in this article was if the success of the iPhone would affect the amount of iPods sold in the future. Whats the point of having both an iPod and a phone when you can have it all in one? I guess we will have to wait and see what happens.



  1. Dalia, well done a comprehensive discussion of ipod and market structure. Yes the future of the ipod and the iphone will be fascinating to watch.

    Comment by Dr Anthony — September 23, 2009 @ 8:38 PM | Reply

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