Economics
Collusive and Non-Collusive Oligopoly
What is an oligopoly?
An oligopoly is a market dominated by a few producers . An oligopoly is an industry where there is a high level of market concentration. Examples of markets that can be described as oligopolies include the markets for petrol in the UK, soft drinks producers and the major high street banks. Another example is the global market for sports footwear – 60% of which is held by Nike a nd Adidas.
However, oligopoly is best defined by the conduct
(or behaviour) of firms within a market .
T he concentration ratio measures the extent to which a market or industry is dominated by a few leading firms.
Normally an oligopoly exists when the top five firms in the market account for more than 6 0% of total market sales.
Characteristics of an oligopoly
T here is no single theory of price and output under conditions of oligopoly. If a price war breaks out, oligopolists may choose produce and price much as a highly competitive industry would; whereas at other times they act like a pure monopoly.
An oligopoly usually exhibits the following features:
1. Product branding: Each firm in the market is selling a branded product.
2. Entry barriers: Entry barriers maintain supernormal profits for the dominant firms. It is possible for many smaller firms to operate on the periphery of an oligopolistic market, but none of them is large enough to have any significant effect on prices and output
3. Inter-dependent decision-making: Inter-dependence means that firms must take into account the likely reactions of their rivals to any change in price, output or forms of nonprice competition.
4. Non-price competition: Non-price competition is a consistent feature of the competitive strategies of oligopolistic firms.
Duopoly
Duopoly is a form of oligopoly. In its purest form two firms control all of the market, but in reality the term duopoly is used to describe any market where two firms dominate with a
What is an oligopoly?
An oligopoly is a market dominated by a few producers . An oligopoly is an industry where there is a high level of market concentration. Examples of markets that can be described as oligopolies include the markets for petrol in the UK, soft drinks producers and the major high street banks. Another example is the global market for sports footwear – 60% of which is held by Nike a nd Adidas.
However, oligopoly is best defined by the conduct
(or behaviour) of firms within a market .
T he concentration ratio measures the extent to which a market or industry is dominated by a few leading firms.
Normally an oligopoly exists when the top five firms in the market account for more than 6 0% of total market sales.
Characteristics of an oligopoly
T here is no single theory of price and output under conditions of oligopoly. If a price war breaks out, oligopolists may choose produce and price much as a highly competitive industry would; whereas at other times they act like a pure monopoly.
An oligopoly usually exhibits the following features:
1. Product branding: Each firm in the market is selling a branded product.
2. Entry barriers: Entry barriers maintain supernormal profits for the dominant firms. It is possible for many smaller firms to operate on the periphery of an oligopolistic market, but none of them is large enough to have any significant effect on prices and output
3. Inter-dependent decision-making: Inter-dependence means that firms must take into account the likely reactions of their rivals to any change in price, output or forms of nonprice competition.
4. Non-price competition: Non-price competition is a consistent feature of the competitive strategies of oligopolistic firms.
Duopoly
Duopoly is a form of oligopoly. In its purest form two firms control all of the market, but in reality the term duopoly is used to describe any market where two firms dominate with a