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What type of competition would most likely exist with a four-firm concentration ratio of 94?
Either an oligopoly (dominated by a few firms) or monopoly (if these 4 firms collude - control price and supply)
Why do oligopolies avoid price competition?
Kinked Demand Curve Theory:It shows why prices in oligopolistic markets tend to remain stable, and why price competition creates price wars so firms compete on non-price factors instead.Price is at P on the graph. If one firm raised their price, other firms will lower there price and capture market share from the firm that initially raised its price. This is because more consumers are likely to buy from the firms with a low price rather than high price. So a rise in price results in a bigger fall in demand - ELASTIC demand. This means LOWER REVENUES for the firm that raised prices.If one firm lowered their price, because of interdependence, other oligopolies will also lower their price so as not lose their market share. Therefore firms will be competing on price which means all firms' revenues will be lowered. A decrease in price creates a smaller increased in demand - INELASTIC demand.Therefore, by lowering/raising firms will lose out either way, Therefore, in order to avoid price wars prices remain stable and firms use non-price competition (or firms may collude to create monopoly power).
Difference between collusive and non-collusive oligopoly?
If in an oligopoly market, the firms compete with each other, it is called a non-collusive, or non-cooperative oligopoly. If the firm cooperate with each other in determining price or output or both, it is called collusive oligopoly, or cooperative oligopoly. Collusive oligopoly exists when the firms in an Oligopolistic market charge the same prices for their products, in affect acting as a monopoly but dividing any profits that they make. Non collusive oligopoly exists when the firms in an oligopoly do not collude and so have to be very aware of the reactions of other firms when making price decisions.
What is the difference between oligo polistic competition and pure monopolistic competition?
In monopolistic competition, firms capture monopoly profits through specialisation of their product, making it non-substitutable with competing firms' products. In oligopolistic competition, this does not occur. Instead, three are three general outcomes: 1) firms collude to mimic a monopoly and share monopoly profits; 2) a dominant firm leads the market and sets the price; 3) firms compete freely and but take each other's decisions into account.
Why is the number of firms small in oligopoly market.explain?
By definition, oligopoly means 'a few firms'. The prefix olig- means 'few' in Greek (e.g.) oligarchy - 'rule of the few') and the suffix -poly is the description of a market.Three reasons an oligopoly may persist even without artificial controls include: 1) the market has high entry costs, which serve as a barrier to entry to new firms because high capital costs provide strict economies of scale to larger firms; 2) the oligopolistic firms collude to control the market and prevent competitors entering; 3) leading firms out-compete new firms by artificially lowering prices, initiating a price war which the smaller firms can't afford as larger firms with more financial capital can.
What type of competition would most likely exist with a four-firm concentration ratio of 94?
Either an oligopoly (dominated by a few firms) or monopoly (if these 4 firms collude - control price and supply)
What term refers to independent firms that agree to eliminate price competition among themselves?
Price fixing is when companies conspire to eliminate price competition among themselves.
Why do oligopolies avoid price competition?
Kinked Demand Curve Theory:It shows why prices in oligopolistic markets tend to remain stable, and why price competition creates price wars so firms compete on non-price factors instead.Price is at P on the graph. If one firm raised their price, other firms will lower there price and capture market share from the firm that initially raised its price. This is because more consumers are likely to buy from the firms with a low price rather than high price. So a rise in price results in a bigger fall in demand - ELASTIC demand. This means LOWER REVENUES for the firm that raised prices.If one firm lowered their price, because of interdependence, other oligopolies will also lower their price so as not lose their market share. Therefore firms will be competing on price which means all firms' revenues will be lowered. A decrease in price creates a smaller increased in demand - INELASTIC demand.Therefore, by lowering/raising firms will lose out either way, Therefore, in order to avoid price wars prices remain stable and firms use non-price competition (or firms may collude to create monopoly power).
Difference between collusive and non-collusive oligopoly?
If in an oligopoly market, the firms compete with each other, it is called a non-collusive, or non-cooperative oligopoly. If the firm cooperate with each other in determining price or output or both, it is called collusive oligopoly, or cooperative oligopoly. Collusive oligopoly exists when the firms in an Oligopolistic market charge the same prices for their products, in affect acting as a monopoly but dividing any profits that they make. Non collusive oligopoly exists when the firms in an oligopoly do not collude and so have to be very aware of the reactions of other firms when making price decisions.
What is the difference between oligo polistic competition and pure monopolistic competition?
In monopolistic competition, firms capture monopoly profits through specialisation of their product, making it non-substitutable with competing firms' products. In oligopolistic competition, this does not occur. Instead, three are three general outcomes: 1) firms collude to mimic a monopoly and share monopoly profits; 2) a dominant firm leads the market and sets the price; 3) firms compete freely and but take each other's decisions into account.
Define price rigidity?
Price Rigidity is a condition where one follows a decrease in price but not an increase in price. This is due to the ability of other firms to match prices with it and it often leads to a kinked demand curve.
Why is the number of firms small in oligopoly market.explain?
By definition, oligopoly means 'a few firms'. The prefix olig- means 'few' in Greek (e.g.) oligarchy - 'rule of the few') and the suffix -poly is the description of a market.Three reasons an oligopoly may persist even without artificial controls include: 1) the market has high entry costs, which serve as a barrier to entry to new firms because high capital costs provide strict economies of scale to larger firms; 2) the oligopolistic firms collude to control the market and prevent competitors entering; 3) leading firms out-compete new firms by artificially lowering prices, initiating a price war which the smaller firms can't afford as larger firms with more financial capital can.
What describes a cartel?
A cartel is a group of firms who collude together for the purpose of avoiding a competitive market in order to create economy profit for themselves. A real life example of a cartel is OPEC (Organization of Petroleum Exporting Countries). Theoretically cartels are very unstable because they are an informal agreement to collude: to sell at a higher price together, rather than compete down the price. It is very unstable because there is no binding agreement that one of the firms will not undersell the other and capture the entire market share.Cartels are a classic example of game theory that describes the prisoner's dilemma.A cartel is a collection of businesses or countries that act together as a single producer and a fundamental economic concept that describes the total amount.
What best describes cartel?
A cartel is a group of firms who collude together for the purpose of avoiding a competitive market in order to create economy profit for themselves. A real life example of a cartel is OPEC (Organization of Petroleum Exporting Countries). Theoretically cartels are very unstable because they are an informal agreement to collude: to sell at a higher price together, rather than compete down the price. It is very unstable because there is no binding agreement that one of the firms will not undersell the other and capture the entire market share.Cartels are a classic example of game theory that describes the prisoner's dilemma.A cartel is a collection of businesses or countries that act together as a single producer and a fundamental economic concept that describes the total amount.
What best describes a cartel?
A cartel is a group of firms who collude together for the purpose of avoiding a competitive market in order to create economy profit for themselves. A real life example of a cartel is OPEC (Organization of Petroleum Exporting Countries). Theoretically cartels are very unstable because they are an informal agreement to collude: to sell at a higher price together, rather than compete down the price. It is very unstable because there is no binding agreement that one of the firms will not undersell the other and capture the entire market share.Cartels are a classic example of game theory that describes the prisoner's dilemma.A cartel is a collection of businesses or countries that act together as a single producer and a fundamental economic concept that describes the total amount.
Going rate pricing?
All firms do have the power to fix a price ,but insteadof doing so,in a competitive market situation firms fix a price which is equal to the average price charged by all firms in an industry,ie,it collects all the prices firms with same product and compute the average.
Which term means the amount that firms will produce and sell at a specific price?
Quantity supplied is the amount that firms will produce and sell at a specific price.
