Oligopoly

Oligopoly is a form of market where there is domination of a limited number of suppliers and sellers called
Oligopolists. In reality, it is the Oligopoly market which exists, having a high degree of market
concentration. This indicates that a huge percentage of the Oligopoly market is occupied by the leading
commercial firms of a country. These firms require strategic planning to consider the reactions of other
participants existing in the market. This is precisely why an oligopolistic market is subject to greater risk of
connivances.

Different theories about Oligopoly Pricing:

4 main theories involved with oligopoly pricing are as follows:

 The prices and profits associated with the concept of Oligopoly is impossible to determine, owing to
problems arising in modeling mutual prices and output decisions
 The oligopolistic business houses join hands in charging the monopoly prices and incur monopoly
profits
 Oligopoly prices and profits exist between the monopoly and competitive endpoints of the scale
 Commercial oligopoly firms compete on the prices in an effort to equalize both the factors like in the
competitive industrial sectors.

Distinct features of an oligopolistic market:

 An oligopolistic market comprises a handful of firms, engaged in selling analogous products

 All oligopolistic markets increase mutual dependence among the firms involved in similar competition.
It also prepares businessmen to accept the outcomes arising from rivalries with respect to alterations in the
production and prices of goods.
 In near future, an oligopolistic market is likely to impose restrictions on admission, in an attempt to
incur abnormal profits.
 Each of the business houses involved with this market produces branded goods

Relevance of the competition between prices and non-prices:

Price Competition deals with offering discounts on the prices of a particular product or a series of products,
in an attempt to generate more market demand of those products. On the other hand, Non-price Competition
concentrates on several other strategies to boost up the market shares.

Price leadership: Oligopolistic market

The dominance of one firm in the oligopolistic market results in price leadership. Firms having less market
shares only follow the prices fixed by leaders.

Oligopolistic competition: Effects

 Oligopolistic competition in most cases leads to collaboration of the business firms on issues like raising
the prices of various goods and subdue production process.
 Under other given market conditions, the competition between the sellers acquires a violent form, on the
grounds of lowering the prices and increasing the production.
 Collaboration of various firms also brings about stabilization in the unsteady markets.
oligopoly
An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very
high (i.e. a large % of the market is taken up by the leading firms). Firms within an oligopoly produce
branded products (advertising and marketing is an important feature of competition within such markets)
and there are also barriers to entry.

Another important characteristic of an oligopoly is interdependence between firms. This means that each
firm must take into account the likely reactions of other firms in the market when making pricing and
investment decisions. This creates uncertainty in such markets - which economists seek to model through
the use of game theory.

Economics is much like a game in which the players anticipate one another's moves.

Game theory may be applied in situations in which decision makers must take into account the reasoning of
other decision makers. It has been used, for example, to determine the formation of political coalitions or
business conglomerates, the optimum price at which to sell products or services, the best site for a
manufacturing plant, and even the behaviour of certain species in the struggle for survival.
Adapted from Brittanica

The ongoing interdependence between businesses can lead to implicit and explicit collusion between the
major firms in the market. Collusion occurs when businesses agree to act as if they were in a monopoly
position.

KEY FEATURES OF OLIGOPOLY

* A few firms selling similar product

* Each firm produces branded products

* Likely to be significant entry barriers into the market in the long run which allows firms to make
supernormal profits.

* Interdependence between competing firms. Businesses have to take into account likely reactions of rivals
to any change in price and output

THEORIES ABOUT OLIGOPOLY PRICING

There are four major theories about oligopoly pricing:

(1) Oligopoly firms collaborate to charge the monopoly price and get monopoly profits

(2) Oligopoly firms compete on price so that price and profits will be the same as a competitive industry

(3) Oligopoly price and profits will be between the monopoly and competitive ends of the scale

(4) Oligopoly prices and profits are "indeterminate" because of the difficulties in modelling interdependent
price and output decisions

THE IMPORTANCE OF PRICE AND NON-PRICE COMPETITION

Firms compete for market share and the demand from consumers in lots of ways. We make an important
distinction between price competition and non-price competition. Price competition can involve
discounting the price of a product (or a range of products) to increase demand.

Non-price competition focuses on other strategies for increasing market share. Consider the example of the
highly competitive UK supermarket industry where non-price competition has become very important in the
battle for sales

 Mass media advertising and marketing

 Store Loyalty cards

 Banking and other Financial Services (including travel insurance)

 In-store chemists / post offices / creches

 Home delivery systems

 Discounted petrol at hyper-markets

 Extension of opening hours (24 hour shopping in many stores)

 Innovative use of technology for shoppers including self-scanning machines

 Financial incentives to shop at off-peak times

 Internet shopping for customers

PRICE LEADERSHIP IN OLIGOPOLISTIC MARKETS

When one firm has a dominant position in the market the oligopoly may experience price leadership. The
firms with lower market shares may simply follow the pricing changes prompted by the dominant firms. We
see examples of this with the major mortgage lenders and petrol retailers.

Advantage & disadvantage of computers

1. Disadvantage

1. It destroys your social life and interactions with humans if you do not maintain the balance.
2. It may effect to the destruction of your eye sight due to radiation.
3. It may cause pimples and wrinkles.
4. It may damage your studies and life.
5. Too much time in front of monitor may adverse effect your eye sight and can also make you fat.
6. The way it distracts and can deviate our thoughts and activities towards unproductive activities.
7. It could cause violation of privacy, impact on labor force, health risks, impact on environment, distraction
from work, and possible antisocial influences.
8. getting away from their real life and getting into bad lines

2. ADVANTAGES
1. It helps you automate various tasks that you can not do manually.
2. It helps you organize your data and information in a better way.
3. It has much more computing and calculating power then an ordinary human.
4. It may help your work to be a lot easier.
5. It may be the storage of your important data and files.
6. It may be your handy book.
7. It may help you solve problems faster than an ordinary human being can do.
8. It has speed, storage, reliability, consistency and communications. 9. It helps you to find useful
information using the Internet. 10. It helps in businesses, factories, offices, schools and homes.