It Has Been Argued That the Uk Banking System Is an Oligopoly

1729 WordsDec 2, 20127 Pages
Question 1 It has been argued that the UK banking system is an oligopoly ( http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8266582/Big-banks-running-an-oligopoly-says-Virgin-Money-chief.html# ) . a) Using appropriate diagrams and economic research critically discuss the extent to which this is the case b) What are the likely implications for consumers? + http://economicsonline.co.uk/Business_economics/Oligopoly.html The UK banking system is an Oligopoly because there are a small number of companies in the industry to allow barriers to be raised against the entry of new firms. ‘It’s important that we have to make sure there’s no banks too big to fail’ (article). Although in an oligopoly its known…show more content…
Moreover it is likely that the oligopolists act together and this way they will be maximising industry profits, by turning prices very high, this will also be negative for consumers. ‘in most circumstances cost pass-on does not depend on the price elasticity of demand nor on the market share of the cost saver, and that with competition the pass-on of firm-specific cost savings is weaker than without’.( journal) ‘ in markets with concentrated banking, potential entrants face greater difficulty gaining access to credit than in markets in which banking is more competitive.' ( journal) this is because if the banking industry is competitive they would try different ways in order to attract different customers, moreover they would be in favour of consumers as they do not want to lose them to competitors. Price discrimination is when a company would sell

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