Advantages Of Oligopoly

This will not only retain the existing customers but will also attract new ones to increase the customer base to optimal level.

market, there is price competition. This can lead to price wars and, therefore, lower prices for

Competition is one of the major reasons why companies cut the prices of their products and services. If other companies were to charge high prices for their products, this would mean that by reducing prices, the company would attract more customers. Pricing of medicine in most cases does not depend on the available resources, but rather, a decision by the manufacturer.

Thirdly, option is to strategically adjust the prices of their products because consumers are often very price sensitive. By doing so the company can either create more value that defines the quality and quantity of the product.

In this article Michael Baker discusses the livelihood of small retailers in a market subjugated by the financially dominant oligopolies, Woolworths and Coles. While the small independent retailers in direct competition with Woolworths and Coles provide some competitive respite for consumers, as they encourage competitive pricing, albeit predatory pricing, it is clear that Woolworths and Coles control the supermarket industry in Australia, in the formation of a duopoly. It is evident that Woolworths and Coles engage in predatory pricing in an attempt to eliminate independent retailers from the market. This article discusses recent efforts made by the Australian government and the Australian Competition

There are many models of market structure in the field of economics. They include perfect competition on one end, monopoly on the other end, and competitive monopoly and oligopoly somewhere in the middle. In this paper, we will focus on the oligopoly structure because it is one of the strongest influences in the United States market. Although oligopolies can also be global, we will focus strictly on the United States here. We will define oligopoly, give key characteristics important to the oligopoly structure, explain why oligopolies form, then give an example of an oligopoly in today’s economy. Finally, we will discuss the benefits and costs in this type of market structure.

Hint : Typically, in a monopolistic competition industry, if one company increases price, the other company also increases their price to make more revenue in the long term.

Cartel - firms ,especially dominant players, gather together to set up a price according to the profit maximisation in the whole market. In this case, firms act like a monopoly. The price of products of each firms is fixed, thus reduction of price competition will be achieved. Instead of pricing strategy, firms will compete each other over non-price competition, for example, advertising. Like monopoly, customers’ interest might be sacrificed because price is constructed according to the market’s profit maximisation point, whole industry can gain abnormal profit, which means customers pay more than they actually need to. According to the figure 1, price of products under cartel is set up at P because of profit maximisation E (MC=MR), and abnormal profit is PP2FG. However, cartel is illegal in many countries, including UK.

the main argument among the board members. I’m not in fever of simply price cutting. My

Strategies of our firm In oligopoly market, one important method to increase the market share is to keep the price lower than competitors price. However, because at the beginning of the game, our firm ignored the importance of the plant size, process improvement and the training, our production cost was higher than other firms. So we could not use the

Joseph Bertrand developed his oligopoly model 45 years after Cournot. Bertrand was the first major challenge to the theory Cournot developed, he argued that Cournots model failed to show how prices were set and by whom, as under his model firms set quantities not prices and no mechanism is explicitly stated for determining pricing (Carlton & Perloff, 2005). Bertrand’s model like Cournot follows the basic assumptions of oligopoly listed above alongside these that there are two firms in the market (duopoly), they sell identical products (homogenous), constant marginal costs (MC), blockaded entry and most importantly of all the firm believes its rivals prices are fixed. Consumers in the market will have complete information and therefore will purchase from the firm with the lowest price, which means if a firm lowers its price

pricing closely, as being out of step with the market can cause dramatic market share changes in a

Competitive pricing: because HN has a large share of the market they are “price leaders” and other businesses follow them

The strategy for setting a product’s price often has to be changed when the product is part of a product mix. In this case, the firm looks for a set of prices that maximizes its profits on the total product mix. Pricing is difficult because the various products have related demand and costs and face different degrees of competition.

Therefore, all firms in the industry would suffer from a sharp fall in profits as they continuously cut prices to compete with each other. Eventually, prices will have to rise again to restore profitability and the firm that started the price war could have lost market share. Therefore firms want to avoid price competition as all firms will lose out in the long term due to reduced profits. So there is an incentive for firms to form a price agreement in order to reduce uncertainty.