Economic Managerial Assessment
Question 2.
Choose the sector in South Africa Economy, which exhibits the features of
Oligopoly.
With more than 30 Million South African mobile phone owners according to data from the “SA Mobile Market “statistical handbook, and since this market is dominated by three companies, which exhibits the features of oligopoly in South Africa. Oligopoly refers to a few sellers with similar products and dominates the market and can influence each other. There are 3 mobile phone service providers, which are Vodacom, MTN and Cell C in South Africa together controlling almost 80% of the market, and their call rates are more costly for their users.
2.1 Evaluate the options of non- collusive competition within the industry.
Oligopoly firms operate in the same markets and they are interdependent, that is their behavior and decisions affect each other’s behavior and decisions. Oligopoly exists when there is many buyers and fewer suppliers within a given markets.
None collusive competition within the industry refers to suppliers who do not agree on prices or quantities formally. The main key behavior will be the fact that companies in Oligopoly competition must take into account what others within the industry will do and they are always torn between cooperating to increase profits and competing to try gaining competitive advantage. With in the mobile phone industry this is visible in the tariffs charged for call rates and the special offerings over weekend or peak hours they turn to overlap with no much difference, which supports none collusion competition since there is no verbal agreement, but one can notice that the action of another service provider influences the other and they always counter act each other. Non collusive competition which is sometimes referred to as tacit collusion can be reached due to the fact that companies can realized the break out of price war through undercutting and this influenced the competitive behavior. For them to not out compete each
Choose the sector in South Africa Economy, which exhibits the features of
Oligopoly.
With more than 30 Million South African mobile phone owners according to data from the “SA Mobile Market “statistical handbook, and since this market is dominated by three companies, which exhibits the features of oligopoly in South Africa. Oligopoly refers to a few sellers with similar products and dominates the market and can influence each other. There are 3 mobile phone service providers, which are Vodacom, MTN and Cell C in South Africa together controlling almost 80% of the market, and their call rates are more costly for their users.
2.1 Evaluate the options of non- collusive competition within the industry.
Oligopoly firms operate in the same markets and they are interdependent, that is their behavior and decisions affect each other’s behavior and decisions. Oligopoly exists when there is many buyers and fewer suppliers within a given markets.
None collusive competition within the industry refers to suppliers who do not agree on prices or quantities formally. The main key behavior will be the fact that companies in Oligopoly competition must take into account what others within the industry will do and they are always torn between cooperating to increase profits and competing to try gaining competitive advantage. With in the mobile phone industry this is visible in the tariffs charged for call rates and the special offerings over weekend or peak hours they turn to overlap with no much difference, which supports none collusion competition since there is no verbal agreement, but one can notice that the action of another service provider influences the other and they always counter act each other. Non collusive competition which is sometimes referred to as tacit collusion can be reached due to the fact that companies can realized the break out of price war through undercutting and this influenced the competitive behavior. For them to not out compete each
References: 1. BERNHEIM, B.D. &WHINSTON, M.D. 2008. MICROECONOMICS. Mc GRAW-HILL IRWIN. 123p; 604p; 703p 2. FRANK, R.H. 2003.MICRORCONOMICS AND BEHAVIOUR. 5TH EDITION. Mc GRAW-HILL. 467p. 3. BEGG, D.,FISCHER, S. & DORNBUSCH, R. 2000. ECONOMICS. 6th EDITION. Mc GRAW-HILL. 555p. 4. The World Bank: http://www.worldbank.org/data-catalog 5. http://www.Kennethcreamer.co.za/ 6. http://www.SARB.co.za 7. http://www.economist.com/index.html 8. http://www.globalissues.org/article/29/causes-of-te-debt-crisis 9. MEN class presentation notes compiled and presented by Dr Melanie Louw. 10. MEN hand book. Milpark Business School second semester 2010.