Usually, the first firm who confesses to the regulator is protected from prosecution, so there is always an incentive to be the first to confess. Barriers to entry A monopoly usually exists when barriers to entry are very high - either due to technology, patents, distribution overheads, government regulation or capital-intensive nature of the industry. The decisions of one firm influence, and are influenced by, the decisions of other firms. There is, therefore, a good deal of interdependences of the firm under oligopoly. Group Behaviour : It is necessary to understand the group behaviour of the firms comprising the oligopoly, i. For example, market for cars in India is dominated by few firms Maruti, Tata, Hyundai, Ford, Honda, etc. Product differentiation leads to the possibility of the price war.
The geographical size of the market can determine whether there is an oligopoly or a monopoly. As the entry in oligopolistic markets is difficult, above normal profits are possible only in the long run. An oligopoly usually exhibits the following features: 1. A market situation in which there are few firms in the market that sells either homogeneous or differentiated product and compete in the market. The automobile industry is a very good example of an oligopolistic market. Other businesses see advertising simply as a way of increasing sales revenue. So, every firm keeps a close watch on the activities of rival firms.
Barriers to Entry of Firms: Barriers to entry to and Oligopolistic industry arise due to- Huge investment requirement, Most advantage by existing firm, , Price cutting. Group Behaviour means that firms tend to behave as if they were a single firm even though individually they retain their independence. Examples of imperfect of differentiated oligopoly are Automobiles and Cigarettes. Furthermore, later the Hindustan Times started offering the newspaper at Rs. The competitors are likely to react with counter policies to avoid drifting off of its customers to other firms. On the other hand, a monopolist produces a product which has only remote substitutes.
It is analysed that businesses in respect to such market condition of oligopoly do not compete with each other on price. This creates uncertainty in such markets - which economists seek to model through the use of game theory. Collusive Oligopoly: If the firms cooperate with each other in determining price or output or both, it is called collusive oligopoly or cooperative oligopoly. Features of Oligopoly Market Features of Oligopoly Market Characteristics or features of Oligopoly Market as under: 1. Oligopoly is the most prevalent type of market and of the greatest importance today.
Although if the competitor decides to decrease its price, both firms would have decreased their profits, so the best for the firm is to. Hence, there is a complete interdependence among the sellers with respect to their price-output policies. Two basic models of oligopoly are Cournot model and Bertrand model. Each firm produces a substantial part of the total supply. However, if you are just getting started with this topic, you may want to look at the four basic types of market structures first. So, price and output decisions of a particular firm directly influence the competing firms. Interdependence: The firms under oligopoly are interdependent in making decision.
Those suppliers would tend to be very large, and can keep out new competitors, along with their new ideas, new products and competitive pricing. Oligopolistic Market An oligopolistic market is dominated by few large suppliers. Another important characteristic of an oligopoly is interdependence between firms. Sources of power A monopolistic market derives its power through three sources: , and deliberate. This is due to the advertising that makes the competition intense.
This means that every strategy that they do, they must take into consideration the possible reactions of the rival firms. There is no generally accepted theory of group behaviour. Individual oligarchs include RomanAbramovich, Alisher Usmanov, and the exiled Vladimir Gusinsky andBoris Berezovsky. This can be only be found in oligopoly. On the one hand, firms realize the disadvantages of mutual competition and desire to combine to maximize their joint profits. This means that each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions.
By The important difference between the model of an oligopoly and the model of a perfectly competitive market is that firms in oligopoly can influence market outcomes. Few firms dominating the market enjoys a considerable control over the price of the product. The capital needed is huge to enter into such market conditions which could adversely affect the motivation of new companies to enter into the industry. In some situations, the firms may collude to raise prices and restrict production in the same way as a monopoly. A feature of many oligopolies is selective price wars. Prices A monopolistic market may quote high prices. As you may have observed, the characteristics of oligopoly are starkly different from the characteristics of monopoly.