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Oligopoly
An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high, firms within an oligopoly produce branded products and there are also barriers to entry. There are collusive and non-collusive oligopolies.
327 Questions
What is an agreement among members of an oligopoly to set prices and production levels called?
collusion
An oligopoly is an economic condition in which there are so few independent suppliers of a particular product that competitive pricing does not take place. Oligopoly is a form of market where there is domination of a limited number of suppliers and sellers called Oligopolists. A situation in which a particular market is controlled by a small group of firms.
An oligopoly is much like a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market. An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high. Firms within an oligopoly produce branded products and there are also barriers to entry. Another important characteristic of an oligopoly is interdependence between firms. This means that each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions. This creates uncertainty in such markets - which economists seek to model through the use of game theory. The retail gas market is a good example of an oligopoly because a small number of firms control a large majority of the market. Economics is much like a game in which the players anticipate one another's moves. Game theory can also be applied in this situations as if decision makers must take into account the reasoning of other decision makers. It has been used, for example, to determine the formation of political coalitions or business conglomerates, the optimum price at which to sell products or services, the best site for a manufacturing plant, and even the behavior of certain species in the struggle for survival.
The ongoing interdependence between businesses can lead to implicit and explicit collusion between the major firms in the market. Collusion occurs when businesses agree to act as if they were in a monopoly position. KEY FEATURES OF OLIGOPOLY - A few firms selling similar product - Each firm produces branded products - Likely to be significant entry barriers into the market in the long run which allows firms to make supernormal profits. - Interdependence between competing firms. Businesses have to take into account likely reactions of rivals to any change in price and output THEORIES ABOUT OLIGOPOLY PRICING There are four major theories about oligopoly pricing: (1) Oligopoly firms collaborate to charge the monopoly price and get monopoly profits (2) Oligopoly firms compete on price so that price and profits will be the same as a competitive industry (3) Oligopoly price and profits will be between the monopoly and competitive ends of the scale (4) Oligopoly prices and profits are "indeterminate" because of the difficulties in modelling interdependent price and output decisions Distinct features of an oligopolistic market: - An oligopolistic market comprises a handful of firms, engaged in selling analogous products - All oligopolistic markets increase mutual dependence among the firms involved in similar competition. It also prepares businessmen to accept the outcomes arising from rivalries with respect to alterations in the production and prices of goods. - In near future, an oligopolistic market is likely to impose restrictions on admission, in an attempt to incur abnormal profits. - Each of the business houses involved with this market produces branded goods THE IMPORTANCE OF PRICE AND NON-PRICE COMPETITION Firms compete for market share and the demand from consumers in lots of ways. We make an important distinction between price competition and non-price competition. Price competition can involve discounting the price of a product (or a range of products) to increase demand. Non-price competition focuses on other strategies for increasing market share. Consider the example of the highly competitive UK supermarket industry where non-price competition has become very important in the battle for sales - Mass media advertising and marketing - Store Loyalty cards - Banking and other Financial Services (including Travel Insurance) - In-store chemists / post offices / creches - Home delivery systems - Discounted petrol at hyper-markets - Extension of opening hours (24 hour shopping in many stores) - Innovative use of technology for shoppers including self-scanning machines - Financial incentives to shop at off-peak times - internet shopping for customers Price leadership: Oligopolistic market The dominance of one firm in the oligopolistic market results in price leadership. Firms having less market shares only follow the prices fixed by leaders. Oligopolistic competition: Effects - Oligopolistic competition in most cases leads to collaboration of the business firms on issues like raising the prices of various goods and subdue production process. - Under other given market conditions, the competition between the sellers acquires a violent form, on the grounds of lowering the prices and increasing the production. - Collaboration of various firms also brings about stabilization in the unsteady markets. PRICE LEADERSHIP IN OLIGOPOLISTIC MARKETS When one firm has a dominant position in the market the oligopoly may experience price leadership. The firms with lower market shares may simply follow the pricing changes prompted by the dominant firms. We see examples of this with the major mortgage lenders and petrol retailers. In reality, it is the Oligopoly market which exists, having a high degree of market concentration. This indicates that a huge percentage of the Oligopoly market is occupied by the leading commercial firms of a country. These firms require strategic planning to consider the reactions of other participants existing in the market. This is precisely why an oligopolistic market is subject to greater risk of connivances.
By: Schafaq Chohan
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers. Barriers to entry are high.
What role did Wales play in World War 2?
they took in evacuees and many men joined the home guard.
is anyone on moshi monsters my names supercoolrn
How is OPEC a multilateral oligopoly?
OPEC is a collection of oil exporting countries. Oligopoly - Industry that is controlled by a few major players (firms or countries) Collusion - When industry leaders secretly agree to limit quantities of production. This will guarantee the colluders a higher price for their product OPEC meet to discuss the quantity of oil they will allow onto the world market. This is collusion. Because the OPEC members are the main suppliers of oil they are said to be an oligopoly
What impact did OPEC have on the oil industy?
OPEC (Organization of the Petroleum Exporting Countries) significantly influenced the oil industry by coordinating the oil production policies of its member countries to stabilize prices and manage supply. Established in 1960, OPEC's decisions on production quotas often led to major shifts in global oil prices, impacting economies worldwide. The organization's ability to leverage collective bargaining power has allowed it to maintain a substantial role in shaping oil market dynamics and influencing energy policies. Overall, OPEC's actions have had lasting effects on both oil prices and the geopolitical landscape surrounding energy resources.
Management in a competitive industry is generally more likely to engage in socially conscious practices compared to firms in an oligopoly. In competitive markets, firms must differentiate themselves to attract customers, and socially responsible practices can enhance their brand image and customer loyalty. Conversely, firms in an oligopoly may prioritize profit maximization and market control, focusing less on social responsibility since their market power can insulate them from competition-driven pressures. Additionally, the potential for collusion in oligopolistic markets can lead to less emphasis on socially responsible behavior as firms may prioritize maintaining their market positions over addressing social concerns.
What are the three Models that are used to explain oligopoly behavior?
The three main models used to explain oligopoly behavior are the Cournot model, the Bertrand model, and the Stackelberg model. The Cournot model assumes firms compete on the quantity of output produced, leading to equilibrium based on each firm's output decisions. The Bertrand model, on the other hand, focuses on price competition, where firms set prices simultaneously, often leading to lower prices for consumers. Lastly, the Stackelberg model introduces a leader-follower dynamic, where one firm sets its output first, and the other firms respond accordingly, influencing market outcomes significantly.
What is difference between perfect competition and oligopoly?
the difference between perfect and imperfect oligopoly
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.
Is Nestle considered an oligopoly?
No a monopoly is defined as a business that controls a whole entire market and can make the products price what ever they want. Even though they bought Hersey there are plenty of other company's like them that they compete with.
What are the three practice of oligopolies that concern the government the most?
Price Fixing, Collusion, And Cartels
What are the characteristics of an oligopoly?
There are three main characteristics of oligopoly. They are industry dominated by a small number of large firms, the firms sell identical or similar products, and the industry has significant barriers to enter.
wal mart is considered to be an oligopoly. It can't be considered a monopoly because it isn't the sole company in its market.It has competition such as target. The only way Wal-Mart is a monopoly is in their low prices in which no one can beat.
What role did the Kristallnacht play in World War 2?
Kristallnacht was the brain child of the Nazi propaganda minister Joseph Goebbels. Property of small Jewish merchants all over Germany was destroyed and window glass smashed in a show of nazi force. It was a wakeup call for many Jews who intensified their efforts to get out of Germany altogether. Unfortunatly, many other countries of the world, the US included had set limits on immigration of these persecuted people and they did not have a place to go. Soon it was too late. To the world the nazi press sanitized kristallnacht and lied about its true intent, but the die was cast and the Holocaust began that night. I guess the roll it played was to further degrade the Jews and embolden the Nazis to believe that they could do what they wanted to them with impunity. The German people wimped out and never spoke against it, so the Nazis then were bolder. When it was all over the vengence of God was unleashed on Germany for touching His ancient people and their cities bombed, their people burned and their beloved Nazi party driven from the face of the earth. === === == The Kristallnacht took place on 9-10 November 1938, in other words several months before the outbreak of World War 2. There is no link between the two.
What is the difference between monopolistic competition and oligopoly?
While monopolistic competition features many small firms competing against each other, oligopoly features competition amongst a few large firms. Both structures represent imperfect market competition.
Not many differences. Capitalism favors competition among private companies, but rarely creates monopolies. One source, in the references, says monopolies can be created by governments more than private companies.
References:
http://www.americansolvent.com/2009/07/03/competition-vs-monopoly-whats-the-big-confusion/
What are advantages of oligopoly to consumers?
what are the advantages of oligopoly? what are the advantages of oligopoly?
What are the similarities between oligopoly and pure monopoly?
They both have to deal with money and buying out.
What is the output effect and the price effect for an oligopoly?
Since P>MC for an oligopoly, the output effect is that selling one more unit at the sales price will increase profit.
The price effect is that an increase in production will increase the total amount sold, which will decrease the price and decrease the profit on all other units sold.
- If the output effect is greater than the price effect, the owner will increase production.
- If the price effect is greater than the output effect, the owner will not increase production (and may even decrease production).
- Oligopolists will continue to increase or decrease production until these marginal effects balance.
Why is The American automobile industry is an archetypical oligopoly?
The American automobile industry followed the pattern of many other oligopolies. Approximately three decades ago the automobile industry had a concentration ratio of 100. All automobiles were made here in America. But since then there have been two major changes. The first was set off by the gasoline shortages we had in the 1970s. The higher gas prices that followed made fuel-efficient cars-particularly Japanese cars-much more attractive to the American buyer. Imports, which had been limited to just 10% of the market, shot up to about 30% by the mid 1980s. With about the same significance to the industry has been the beginning of the Japanese transplants, which began setting up assembly lines during the 1980s. Today these firms assemble half the motor vehicles produced in the US.
