Oligopolistic Market Analysis

To what extent does Ital Automotive (Shanghai) Co., Ltd, China, approximate an oligopolistic market structure?

Dealers’ respective locations are shown on the Fig. 1 and Fig. 2. They are all surrounded by malls and business centers in central areas of Shanghai.

Ital Automotive (Shanghai) Co., Ltd is likely to share the features of oligopolistic market structure, for its relative dominance of the luxury car industry, high barriers to entry, differentiated products and interdependence of the Ferrari and its competitors. Thus, I researched the extent to which it approximates an oligopolistic market structure.

Different types of markets

Market refers to the place where the interactions of buyers and sellers of goods and services happen,

This distinct feature of the luxury sports car market in Shanghai makes Ital Automotive (Shanghai) Co., Ltd a less approximation to monopoly.

Monopolistic Competition:

Monopolistic competition shares certain features from both monopoly and perfect competition, so it could lie between perfect competition and monopoly. However, unlike that of perfect competition, monopolistic competition has relatively differentiated products; different from that of monopoly, there are low barriers to entry or exit, which resembles perfect competition. The real examples of monopolistic competition are ubiquitous: numerous clothing stores atNanjing road pedestrian street in Shanghai, different restaurants along the Bund, etc.

Specifically, its market structure exhibits the following traits:

• There are a relatively significant number of sellers and buyers in the market, although not as large as that of the perfect competition.

• Individual firms produce slightly differentiated products, though the fundamental characteristics of products remain unaltered. Firms may alter the appearance, design, quality, additional service of the products in order to become more competitive and gain more leverage on pricing in the

However, firms would make normal profits in the long run, as in the perfect competition. For instance, if existing firms have made economic profits, more firms may be attracted to the potential profits and may enter the market freely due to the ease of entry. Consequently, previously firms that benefited from economic profits would lose part of their demand, thus continuing reducing outputs and losing profits until all previous profits are eliminated. When existing firms have made short-run losses, some of them might exit the market due to the shutdown. Therefore, each of the remaining firms would gain more demand from consumers, potentially increasing their outputs and the long-run profits until previous losses are cleared out and normal profits