Business Economics Tate and Lyle Oligopoly Collusion Supply and Demand

This graph is specific to an oligopoly and shows the change in quantity demanded in relation to the change in price for both elastic and inelastic goods. Total Revenues will be increased, if the firm decreases their price but increase their quantity. Due to the fact that the costs remain the same, the revenue line on the graph can be seen to be steeper than the costs meaning that the profit is higher. The graph therefore also indicates the point where the firm is able to make the most amount of profit, in relation to the price they set and the quantity they produce.

The industry I’ve selected is the cellular phone service industry. This industry’s market structure is an oligopoly, meaning that a few large firms control the market. Four main firms, T-Mobile, AT&T, Sprint, and Verizon dominate the cell phone service industry. Although the four firms compete against one another, they typically avoid price competition in order to avoid price wars that decrease profits for all. Instead, they use other tactics, such as advertising and improved customer service to gain a higher demand in the market. Price wars occur due to the interdependence of firms involved in an oligopolistic market structure. A decision made by one firm to increase or decrease prices will lead to a fluctuation of the demand curve for the

(Roy, Matthew) The small companies hold a very small part of the market; approximately 13.6%. (Roy, Matthew)The four larger companies hold the other 86.4% of the market. (Roy, Matthew) These four big cereal manufacturers are Kellogg, General Mills, Post, and Quaker Oats. “Great Barriers to entry and the inelastic nature of cereal allow this oligopoly to exist and numerous government attempts to end it have failed.” (Roy, Matthew) Due to the oligopolistic nature of the industry companies are able to turn large profits as well. (Roy, Matthew)

A major feature of an oligopoly market is that any singular firm has the power to set market prices. This is evident in the example of Coles and Woolworths in Australia as they dominate the market share with 72.5%. Due to there only being a small number of firms, they are able to set their prices and change price and

2. (Price Leadership) why might a price–leadership model of oligopoly not be an effective means of collusion in an oligopoly?

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

Oligopolies have been around ever since there is trade. However, it has only recently gained grounds in this age of globalisation. Never before has oligopolistic competition been so fiercely contested across so many industries.

A monopolistic competition describes a common market structure in which firms have many competitors or sellers, but each one sells a vaguely distinctive product or service. One of this market structure’s characteristics is that each individual firm makes independent decisions about price and output, based on its product, its market, and its costs of production (Economics Online, 2015). Another characteristic is there is freedom to enter or leave the market, since there are no major barriers to entry or exit. The opposite of this market structure is an oligopoly. Oligopoly means few sellers. Oligopoly is the market structure in which there are only a few firms or a few firms dominate the market (Amacher & Pate, 2013). In an oligopolistic market, each seller supplies a large

Assuming that the demand and supply for premium coffees are in equilibrium, the price will be at a constant, without significant pressure from the market. If Starbucks introduced the world to premium blends, this would cause a positive shift in the demand curve. There a higher equilibrium price and higher quantity when demand increases and supply remain unchanged. As prices increase, and the market moves to a new equilibrium, we will see higher wages, more advances and investments in technology and infrastructure, and greater competition. As production become more efficient and competition becomes greater, supply will increase and cause prices to settle back down. There are several factors that will impact the long-term equilibrium, such as changes in supply. For example, if a hard freeze eliminated Brazil’s premium coffee crop, this would cause a negative shift in the supply curve. Assuming demand remains constant a negative shift in the supply curve will cause quantity to decrease and equilibrium price to increase. Research shows that in 2011 a frost occurred in Brazil's southeastern coffee growing belt. Traders worried that next year's yields could be hurt. At the same time, heavy rains during harvest forced Columbia to reduce its crop estimate for 2011. Understanding the impact of problems along the supply chain and how the changes in supply

In oligopoly market, each firm has substantial market power with high degree of interdependence. The key for success in a oligopoly market is to gain more market share than the competitors. Increasing the price can lead to loss of market share to the competitors, so in the oligopoly market, if a firm decreases the price, the other firms will always follow, but if a firm increase the price, the other firms will not follow. The demand curve is kinked.

Schemes such as Tesco’s Club Card, help oligopolists retain customer loyalty and deter entrants who need to gain market share.

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

Oligopoly Oligopoly is a market structure in which the number of sellers is small. Oligopoly requires strategic thinking, unlike perfect competition, monopoly, and monopolistic competition. • Under perfect competition, monopoly, and monopolistic competition, a seller faces a well defined demand curve for its output, and should choose the quantity where MR=MC. The seller does not worry about how other sellers will react, because either the seller is negligibly small, or already a monopoly. Under oligopoly, a seller is big enough to affect the market. You must respond to your rivals’ choices, but your rivals are responding to your choices.

In micro-economics market failure is characterized by resource misallocation and subsequent Pareto inefficiency. Just as the invisible hand falters, so is the case that the unregulated markets are incapable of solving all economic problems. In laissez-faire economy, market models mainly monopolistic, perfect competition and oligopoly are expected to efficiently allocate resources for the “welfare benefit” of the society. However individualistic and selfish private interests divert the public benefits thereby prompting government intervention to correct the imperfection which may lead to disastrous economic impact. Although corrective intervention policies by government may not necessarily address the underlying imperfection induced by

The bargaining power of buyers: Buyers have more control over an industry than one might think. They want lower prices, higher quality, and more services and this makes the competitors play against each other. The profitability suffers as each competitor tries to make their product or service better (Dess, p. 54). McDonald’s has a $1.00 menu as does Burger King and Wendy’s. Each time I go into either of them there is a better item added to the $1.00 menu. For instance, McDonald’s has the scrumptious Double Cheeseburger and Wendy’s has the