Oligopoly Market
OLIGOPOLY AND MONOPOLISTIC COMPETITION
Up to now, we have covered two extreme types of markets. We covered perfect competition with the highest degree of competition, then we covered monopoly with the lowest degree of competition. Now, we will cover oligopoly and monopolistic competition. These two market types are in between two extremes: they show some features of competition and some features of monopoly.
Oligopoly Definition: Oligopoly is a market structure in which there are a few sellers and they sell almost identical products. There are barriers to entry in oligopoly. Oligopoly is characterized by the tension between cooperation and self- interest among these sellers. For example, if the oligopolist firms can cooperate, they can charge a high price and share profits. But if they cannot cooperate and instead they compete because of following their own self-interest, then price goes down and profits decline. We will give examples of this later.
Oligopoly Examples: crude oil (Kuwait, Iraq, Saudi Arabia, Venezuela, Kazakhstan, Azerbeijan) , coke (Coca Cola, Pepsi, Cola Turka), GSM providers (Turkcell, Vodafone, Avea), inter-city bus transportation (between Istanbul & Denizli: Varan, Ulusoy, Pamukkale, Köseoğlu), airline travel (between Istanbul and Frankfurt: Turkish Airlines, Pegasus, …) etc.
Monopolistic Competition Definition: Many firms sell products that are similar but not identical. There is free entry and exit like perfect competition. But at the same time, there is product differentiation. Product differentiation allows firms to charge a high price and collect some profits.
Monopolistic Competition Examples: music CDs (every artist has a different CD), movies (every film is different), computer games, restaurants, athletic apparel (adidas, nike, umbro, Turkish brands), etc.
Two dimensions: 1-Number of firms 2-Product differentiation
Perfect Competition: Many No
Monopoly: One No
Oligopoly: A few No
Monopolistic Comp.: Many Yes
Up to now, we have covered two extreme types of markets. We covered perfect competition with the highest degree of competition, then we covered monopoly with the lowest degree of competition. Now, we will cover oligopoly and monopolistic competition. These two market types are in between two extremes: they show some features of competition and some features of monopoly.
Oligopoly Definition: Oligopoly is a market structure in which there are a few sellers and they sell almost identical products. There are barriers to entry in oligopoly. Oligopoly is characterized by the tension between cooperation and self- interest among these sellers. For example, if the oligopolist firms can cooperate, they can charge a high price and share profits. But if they cannot cooperate and instead they compete because of following their own self-interest, then price goes down and profits decline. We will give examples of this later.
Oligopoly Examples: crude oil (Kuwait, Iraq, Saudi Arabia, Venezuela, Kazakhstan, Azerbeijan) , coke (Coca Cola, Pepsi, Cola Turka), GSM providers (Turkcell, Vodafone, Avea), inter-city bus transportation (between Istanbul & Denizli: Varan, Ulusoy, Pamukkale, Köseoğlu), airline travel (between Istanbul and Frankfurt: Turkish Airlines, Pegasus, …) etc.
Monopolistic Competition Definition: Many firms sell products that are similar but not identical. There is free entry and exit like perfect competition. But at the same time, there is product differentiation. Product differentiation allows firms to charge a high price and collect some profits.
Monopolistic Competition Examples: music CDs (every artist has a different CD), movies (every film is different), computer games, restaurants, athletic apparel (adidas, nike, umbro, Turkish brands), etc.
Two dimensions: 1-Number of firms 2-Product differentiation
Perfect Competition: Many No
Monopoly: One No
Oligopoly: A few No
Monopolistic Comp.: Many Yes