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Similarities of monopsony and oligopoly
Telecommunications monopoly market competition
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An oligopoly describes a market situation in which there are limited or few sellers. Each seller knows that the other seller or sellers will react to its changes in prices and also quantities. This can cause a type of chain reaction in a market situation. In the world market there are oligopolies in steel production, automobiles, semi-conductor manufacturing, cigarettes, cereals, and also in telecommunications.
Often times oligopolistic industries supply a similar or identical product. These companies tend to maximize their profits by forming a cartel and acting like a monopoly. A cartel is an association of producers in a certain industry that agree to set common prices and output quotas to prevent competition. The larger the cartel, the more likely it will be that each member will increase output and cause the price of a good to be lower.
The majority of time an oligopoly is used describe a world market; however, the term oligopoly also describes conditions in smaller markets where a few gas stations, grocery stores or alternative restaurants or establishments dominate in their fields. A distinguishing characteristic of an oligopoly is the interdependence of firms. This means that any action on the part of one firm with respect to output, price, or quality will cause a reaction on the side of other firms.
Many times an oligopoly leads to price leadership between many firms. A price leadership is the practice in many oligopolistic industries in which the largest firm publishes its price list ahead of its competitors. Then these competitors feel the need to match those announced prices so they lower their prices. This is also termed a parallel pricing.
Oligopolies tend to be broken down into one of two distinguished groups. These groups are either a homogeneous or differentiated oligopoly. Homogeneous oligopolies have a standardized product and which include industrial, with petroleum serving as the standardized example, and also services such as banking. Differentiated oligopolies, where the products have some differences, are found in consumer goods industries, such as cars, biscuits, beer and electrical appliances.
There is however another oligopoly in which the manner of the corporation or industry is quite familiar to that of a monopoly. This oligopoly is termed collusive. A collusive oligopoly has the ability to behave in the manner of a m...
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...nt with the relevant demand curve of D1D1, and prices below Po are consistent with the relevant demand curve of D2D2. The kink in the demand curve occurs at the point labeled E. There is also a gap in the marginal revenue curve marked by MR1 and MR2.
There are many oligopolies in the world market that dominate their respective fields. They have the ability to control prices and quantities of their goods, forcing other companies in that specific industry to adjust to the oligopoly’s changes. The oligopoly has the power to do that because there are few sellers in the industry and each seller reacts to that of the other ones. This often leads to price leadership. This price leadership has a dramatic impact on consumers. Companies compete with the prices of goods and they keep lowering their prices. At the time these price decreases are beneficial for consumers; however, an oligopoly can afford to lower their prices and the smaller firms can not. As a result these smaller firms might be annihilated and enable the oligopoly to dominate the industry. If the oligopoly comes to dominate their industry they then have the ability to set prices higher, a terrible aspect for consumers.
with a concentrated market share, an example of an oligopoly today. would be Nike, Reebok and Adidas for shoes. Most industries today are oligopolies, the possible reasons for this. would be that oligopolies in contrast to monopolistic competition. would be able to earn abnormal profits in the long run as well as the short run, as shown in the previous section.
To differentiate monopolies from trusts, it must be said that single companies were able to form monopolies when in control of “nearly all of one type of product or service… [This] affects the consu...
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
Monopolies formed all over the country in steel, oil, and railroad companies. These big businesses made it very difficult for other businesses to prosper in the same field. Document F clearly illustrates the direct effects of the monopolies: "They are monopolies organized to destroy competition and restrain trade. Once they secure control of a given line of business, they are master of the situation and can dictate to the two great classes with which they dealthe producer of the raw material and the consumer of the finished product. They limit the price of the ra material so as to impoverish the producer".
Oligopolies do not compete on prices. Price wars tend to lead to lower profits, leaving a little change to market shares. However, Oligopolies firms tend to charge reasonably premium prices but they compete through advertising and other promotional means. Existing companies are safe from new companies entering the market because barriers to entry to the market are high. For example, if products are heavily promoted and producers have a number of existing successful brands, it will be very costly and difficult for new firms to establish their own new brand in an oligopoly market.
It is a well-known fact that every firm wants to be successful in its business. Sometimes it is difficult to decide what kind of actions to take in order to achieve it. Especially, it is hard on oligopoly market because this is one of the most complicated market structures. Oligopoly includes many models and theories such as duopoly where are just two producers and which pricing decisions remind monopoly, kinked demand curve, which decreases economic profit, and cartel, which brings economic profit just for the short-run. However, to be a successful oligopolistic firm in the long run, managers should include in the planning process such economic theories and models as producer interdependence, the prisoner’s dilemma, price leadership, nonprice adjustments, and correct using of barriers to entry.
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
Monopoly is when a business or a single company owns nearly all its market for a given type of product and services. There is no competition in monopoly and the price of a specific product is set by the monopoly itself. Therefore, a monopoly's price is the market price and demand are market demand; the firm and the industry are the same. It can charge higher prices at any output consequently, consumers will not be able to substitute the good or service with a more affordable alternative. Monopoly’s soul goal is to make profit at any price and quantity. Still to this day, monopolies do exist but at a smaller scale.
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
In the short run, oligopolies are. able to earn abnormal profits, but in the long run as well they are. able to sustain abnormal profits due to the barriers to entry and exit. Then the s The barriers act as a strong deterrent to firms that want to come in. the industry and " eat into" the abnormal profits and then exit the market.
A Monopoly is a market structure characterised by one firm and many buyers, a lack of substitute products and barriers to entry (Pass et al. 2000). An oligopoly is a market structure characterised by few firms and many buyers, homogenous or differentiated products and also difficult market entry (Pass et al. 2000) an example of an oligopoly would be the fast food industry where there is a few firms such as McDonalds, Burger King and KFC that all compete for a greater market share.
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
An oligopolistic market has a small number of sellers dominating market share and therefore barriers to entry are high. These sellers are highly competitive and do not act independently of each other. Access to information is limited so sellers can only speculate of their competitor’s actions. Sellers will take advantage of competitor’s price changes in order to increase market share.
The second market structure is a monopolistic competition. The conditions of this market are similar as for perfect competition except the product is not homogenous it is differentiated; thus having control over its price. (Nellis and Parker, 1997). There are many firms and freedom of entry into the industry, firms are price makers and are faced with a downward sloping demand curve as well as profit maximizers. Examples include; restaurant businesses, hotels and pubs, specialist retailing (builders) and consumer services (Sloman, 2013).