Characteristics Of An Oligopoly

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It's called an oligopoly. It's not a regular market... It's a market in which they control the prices and they've been doing it for years. Richard Miller The quote above explains the characteristics of an oligopoly in comparison to other market structures. Miller suggests the nature of the market is uncommon and that prices are rigid. The hypothesis mentioned in the introduction supports this assumption on the real estate market in Hanoi. However, it can be questioned whether the real estate market is an oligopoly. 2.1 Market structure In economics, a market structure refers to the characteristics of a market that influence the behavior of firms within an industry. These include number of firms, market power, level and forms of competition,…show more content…
In oligopoly, industries are dominated by a small number of large firms, though in any one industry the firms are likely to vary in size. The concentration ratios of these firms tend to be fairly high. This means that, for example, the largest four firms in the industry accounts for 70% of the market share. The implication of this is that firms in oligopoly are interdependent. The actions of one firm will directly affect the others. Each of the large firms in the industry has to try and predict the actions of the others. They may collude to avoid this. 2.2.3 High barriers to entry/exit Barriers to entry are high. Oligopolies often maintain their position of dominance in a market because other potential rivals are unable to enter the industry. The hurdles that prevent other firms from entering the industry are called barriers to entry. These barriers could include government licenses, economies of scale, patents and access to technology. In addition, many established oligopolies spend enormous sums on product differentiation and advertising, making it difficult for new firms to match such expenditures. High barriers to entry allow firms to make economic profits in the long-run. 2.2.4 Mutual

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