Market Structure of Oligopoly - 1755 Words

Analyse The Structure Of The Market Structure Of Oligopoly And The Difficulty In Predicting Output And Profits Market structure of oligopoly Oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industrys output can affect competitors. Examples of oligopolistic structures are supermarket, banking industry and pharmaceutical industry. The characteristics of the oligopoly are: • Small number of large firms dominate the industry • High degree of interdependence: the behaviour of firms are affected by what they believe other rivalry firms might do • High barriers to entry that restrict new firms to enter the industry e.g.†¦show more content†¦Like monopoly, if the oligopoly is maintained in the long run, it charges a high price, produces less output and fails to maximise social welfare relative to perfect competition. Cartel is seen by the government as a means of driving up prices and profits which is against the public interest. As a result it is illegal to operate the cartel in many countries. Tacit collusion Tacit Collusion is collusion that is not organized through a formal, open contract between colluding parties. Tacit collusion is when firms abide to the price that has been set by a recognized leader. The leader is usually the largest firm i.e. the firm that controls the industry known as dominant firm price leadership. On the other hand, the leader may be the firm that is most reliable to follow, known as barometric firm price leader. Dominant firm price leadership This is when smaller firm chooses the same price as the price set by the large firms in the industry. Source: www.bized.ac.uk/educators/he/pearson/lectures The leader tends to maximise profits where marginal revenue is equal to marginal the marginal cost, then produces at QL and sell goods at PL on its demand curve where marginal cost equal marginal revenue. At this stage other firms in the industry will follow the price. Therefore, the market produces at Qt, with other firms producing the output not supplied by the leader i.e. Qt-Ql. Barometric firm price leadership. WhereShow MoreRelatedOligopoly Market Structure2723 Words   |  11 PagesRunning Head: Marketing Structures Toyota as an example of an oligopoly market structure Name: Institution: Instructor’s Name: Course code: Course Title: Contents Contents 2 Toyota as an example of an oligopoly market structure 3 1.0 INTRODUCTION 3 1.1 Terminologies of market structures 3 1.11 Perfect competition 4 1.12 Monopoly 4 1.13 Monopolistic competition 4 1.14 Oligopoly 4 2.0 THE TOYOTA COMPANY 5 2.1 Characteristics of an Oligopoly 6 2.2 Toyota Motor Company’sRead MoreOligopoly Market Structure2237 Words   |  9 PagesOligopoly Oligopoly is a market structure in which the number of sellers is small. Oligopoly requires strategic thinking, unlike perfect competition, monopoly, and monopolistic competition. †¢ Under perfect competition, monopoly, and monopolistic competition, a seller faces a well defined demand curve for its output, and should choose the quantity where MR=MC. The seller does not worry about how other sellers will react, because either the seller is negligibly small, or already a monopoly. Under oligopolyRead MoreMonopolistic and Oligopoly Market Structures2166 Words   |  9 PagesIntroduction – Market structures and cases under study Definition - The interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market. Market structures under study are ones which are more pronounced than others in the real world i.e. ‘Monopolistic competition’ and ‘Oligopoly’. Very few markets in realRead MoreEconomic Analysis of an Oligopoly Market Structure1715 Words   |  7 Pages1. Introduction 1a. Article Summary In this article Michael Baker discusses the livelihood of small retailers in a market subjugated by the financially dominant oligopolies, Woolworths and Coles. While the small independent retailers in direct competition with Woolworths and Coles provide some competitive respite for consumers, as they encourage competitive pricing, albeit predatory pricing, it is clear that Woolworths and Coles control the supermarket industry in Australia, in the formation of aRead MoreThe Market Structures, Monopolistic Competition, Oligopoly And Monopoly1507 Words   |  7 PagesIntroduction A market is a dynamic and restless institution where commercial dealing between buyers and sellers takes place. There are many companies and businesses that run the market. According to how the firm functions and other factors like the number of competitor firms and the type of products produced, the firm is classified into a particular market structure. The other competing firms in the market structure affect the pricing strategies of a particular firm in the same industry. Based onRead MoreMarket Structures : Perfect Competition, Monopoly, Monopolistic Competition And Oligopoly2078 Words   |  9 PagesExecutive summary The main purpose of this report is to introduce four market structures – perfect competition, monopoly, monopolistic competition and oligopoly, and their determinations of price and output. It also discussed the possibility for firms to generate profits in the short-run and/or in the long-run within these four market structures. It will be shown in the discussion that both monopolistic and oligopolistic firms are able to generate profits in both short-run and long-run, while firmsRead MoreWhy Prices Often Show Less Variation Under Oligopoly Than Under Other Types of Market Structure2036 Words   |  9 PagesWhy prices often show less variation under oligopoly than under other types of market structure Oligopoly is a market structure, which has some distinctive qualities that separate it from the others. Most notably they are that oligopoly has barriers of entry and is made of only a few companies, which supply the majority of the market and are interdependent. In other market structures price of the product and other decisions are often based on technical information such as marginal cost or demandRead MoreMaximizing Profits in Market Structures1287 Words   |  6 PagesAssignment: Maximizing Profits in Market Structures 1 What are the characteristics of each market structure? A competitive market is many sellers that sell similar products with very little control over the market selling price. An example of competitive market structure is a gasoline station. There can be many gasoline stations in a certain mile radius, the more gasoline stations there are in a small area the higher the competitive the market. Monopolies: Monopolies are a groupRead MoreMarket Structures Of The Market1198 Words   |  5 PagesINTRODUCTION Market Structures are classified in term of the presence or absence of competition. When competition is absent, the market is said to be concentrated. There is a spectrum, from perfect competition to pure monopoly. Market structure is the physical characteristics of the market within which firms interact. It involves the number of firms in the market and the barriers to entry. Perfect competition, with an infinite number of firms, and monopoly, with a single firm, are polar oppositesRead MoreMaximizing Profits in Market Structures Essays1238 Words   |  5 PagesProfits in Market Structures Maximizing Profits in Market Structures Competitive Markets The basic characteristics of a competitive market are one of many suppliers provides basically the same goods or services. There are so many suppliers and so many consumers that one supplier alone cannot influence the market prices. Each supplier, or price taker, is at the mercy of the current market conditions at any given time. (N. Gregory Mankiw, 2010, p.290).This market structure