Economique Weblog: OLIGOPOLY!

OLIGOPOLY! =D

Oligopoly is a state of limited competition, in which a market is shared by a small number of producer or sellers. Basically oligopoly would only exist when there are only little firms in an industry that they must consider the reactions of the rivals in formulating its price policy. Therefore, they are 6 essentials characteristic features of oligopolistic market.

Oligopoly characteristics are:

Firstly, a few large producers where they have a wide range of sellers competing with each other for growing their supplies goods or commodities for sale.

Secondly, homogeneous products can be like rubber, tin, oil, steel and zinc or differentiated products (an imperfect oligopoly) are automobiles, tires, detergent, cigarettes and breakfast cereals.

Thirdly, is the control over price where as they must have a mutual interdependence as in respect between two or more parties for their pricing policy and their strategic behavior.

Fourthly, high entry barriers are when the difficulty needs to enter the industry. Such as, likely the entry exist more of a copyrights, patents, advertisements and also economies of scale (EOS).

Fifth, are mergers where as a combination of two companies.

Sixth, Non-price competition like brand loyalty, advertisement, marketing special offer, packaging, after sales service.

PARTNERS OR RIVALS?????

In oligopoly there is a big dilemma where an oligopoly need to choose either to cooperate with one another to create on large monopoly or to not cooperate with rival firms. If they join with one another they can jointly restrict output and enjoy the monopoly benefits in the long-run.

Collusion in oligopoly to enhances profit. Other collusion are covert collusion in a tacit understandings and obstacle to collusion where they are demand and cost differences, number of firms, cheating, recession, potential entry and legal obstacles: antitrust law.