Monopolistic and Oligopoly Market Structures
1. Introduction – 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 real world can be classified as perfectly competitive or as a pure monopoly. The vast majority of firms do compete with other firms, often quite aggressively, and yet they are not price takers: they do have some degree of market power. Most markets, therefore, lie between the two extremes of monopoly and perfect competition as seen in in the below picture namely, monopolistic competition and oligopoly.
Perfectly
Competitive
Monopolistic competition
Oligopoly
Pure
Monopoly
Fig. 1 Cases under study are – Indian restaurant market in UK (Monopolistic competitive) and AT&T’s wireless service (Oligopoly). Some interesting facts about these 2 cases:
Both are perfect examples for studying the behavior of Monopolistic competition & Oligopoly market structures.
Telecommunication industry has always been a key contributor towards growth of hi-tech industry in US. (Remember Hi-tech industry alone contributed 20% towards the growth of US economy directly elevating real GDP growth by 1.5 percentage point ).
Indian curry has become an integral part of British cuisine, so much so that, since the late 1990s, Chicken Tikka Masala has been referred to as "a true British national dish" .
AT&T was a pure monopoly protected by force of law before the breakup of the Bell System in Jan 1, 1984 .
2. A brief note on Monopolistic competition Market structure
Monopolistic competition is nearer to the competitive end of the spectrum. It
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 real world can be classified as perfectly competitive or as a pure monopoly. The vast majority of firms do compete with other firms, often quite aggressively, and yet they are not price takers: they do have some degree of market power. Most markets, therefore, lie between the two extremes of monopoly and perfect competition as seen in in the below picture namely, monopolistic competition and oligopoly.
Perfectly
Competitive
Monopolistic competition
Oligopoly
Pure
Monopoly
Fig. 1 Cases under study are – Indian restaurant market in UK (Monopolistic competitive) and AT&T’s wireless service (Oligopoly). Some interesting facts about these 2 cases:
Both are perfect examples for studying the behavior of Monopolistic competition & Oligopoly market structures.
Telecommunication industry has always been a key contributor towards growth of hi-tech industry in US. (Remember Hi-tech industry alone contributed 20% towards the growth of US economy directly elevating real GDP growth by 1.5 percentage point ).
Indian curry has become an integral part of British cuisine, so much so that, since the late 1990s, Chicken Tikka Masala has been referred to as "a true British national dish" .
AT&T was a pure monopoly protected by force of law before the breakup of the Bell System in Jan 1, 1984 .
2. A brief note on Monopolistic competition Market structure
Monopolistic competition is nearer to the competitive end of the spectrum. It