Executive Summary

This report provides an analysis on several concepts in terms of concepts from microeconomics, market structures, pricing policies and policy recommendations in relation to the Sri Lankan mobile communication industry. Further, major features in relation to the Sri Lankan mobile communication context is described while applying different economics concepts. Primary and Secondary data was obtained through economics concepts theories, other research articles and a detailed web search.

A. Using the theories and models that you have studied under microeconomics, evaluate and briefly explain the key features which showcases the economics of firms that operate within the mobile communication industry

Below section describes the concepts from microeconomics to examine main features of the mobile communication industry.
Market structure:
There are 4 main market structures according to the basic economics concepts. They are, Perfect Competition, Oligopoly, Monopoly and Monopolistic Competition. In the Sri Lankan mobile communication industry, there are only a few players and they are Dialog, Mobitel, Airtel, Etisalat and Hutch. Further, the Number of sellers are a few firms, Barriers to enter is high, Nature of substitute products are very good substitutes or differentiated. Accordingly, an oligopoly market structure is portrayed (Walker, 2010).
Substitute products:
In the mobile communication industry, the nature of the substitute products are as follows. There are good substitutes or differentiated substitutes according to benefits and cost. The method they offer them, the products are in similar way (Mankiw, 2000).
Pricing strategy:
Pricing strategies of the industry players should be capable of addressing following aspects
 Market needs of the mobile communication customers
 Striking the right balance in terms of the price and performance for the new age products
 The preparedness and willingness of customers to pay for the value they get
 Pricing strategies should give incentives for the buyers to change from conventional technologies to new technologies
In the mobile communication industry, the point marked as profit maximum price is the price a firm should set price as demand above this point elastic and below is inelastic.