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Oligopoly Market

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Oligopoly Market
Introduction

As we can see, this assignment requires us to have an understanding on the oligopoly market, which is one of the most sought after market condition which is being applied in many sectors, including banking, airline and car industry. Many large organizations are involved in merger and acquisition to strengthen its position besides expanding their market share. As example, Hong Leong Bank completed a takeover on EON Bank to consolidate its position as one of the major bank in Malaysia (Bloomberg, 2011).

Oligopoly market is defined as a market that consists of a small number of large players (Begg & Ward, 2009). In Malaysia, airline and banking industry are two industries that have small numbers of large players. As we can see, there are certain characteristics that we could observe from oligopolistic market. The first characteristic is that the entry barriers to the market are high, thus controlling the number of players joining the market (Begg & Ward, 2009). Entry barriers exist that allow a handful of firms to achieve economies of scales, but no more beyond that. Any new firms would have too small a market share and would have to produce at too high a price Additional sources of barriers to entry often result from government regulation favouring existing firms making it difficult for new firms to enter the market.

The second characteristic of oligopoly is that it produced homogenous or differentiated products (Begg & Ward, 2009). For homogenous products, industries in these markets produce intermediate goods which are use by other different industries later on for manufacturing the products. Examples are raw materials such as petrol. As for differentiated products, goods manufactured in these kinds of markets are for personal consumption as they have different needs and wants.

Another characteristic that we could derive from oligopoly market is that the firms are interdependent of one another. In oligopoly market, each firm is so large that



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