Oligopoly Versus Monopoly Competition Essay

Oligopolistic markets, such as supermarkets or car manufacturing, can be defined in terms of market structure or in terms of market conduct.

1) An Oligopolistic market structure is a structure where very few large businesses sell a particular standard Good or differentiated Good, and to whose market entry proves difficult. This in turn, gives little control over product pricing because of mutual interdependence (with the exception of collusion among businesses) creating a non-price competition meaning they are the ‘price setters’. A good rule to help classify an

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.

Firm under perfect competition and the firm under monopoly are similar as the aim of both the seller is to maximize profit and to minimize loss. The equilibrium position followed by both the monopoly and perfect competition is MR = MC. Despite their similarities, these two forms of market organization differ from each other in respect of price-cost-output. There are many points of difference which are noted below.

1. Describe each market structure discussed in the course (perfect competition, monopolistic competition, oligopoly, and monopoly) and discuss two of the market characteristics of each market structure.

Markets differ in a variety of ways including the degree of concentration and competitiveness, a fact which is reflected in the concept of ‘market structure’. Economists’ models link the structural characteristics of a market to the behaviour of firms in that market and subsequently to their performance. A key question therefore is how far a firm’s strategic decisions are shaped by the structure of the market in which it operates.

The organization and characteristics of a specific market where a company operates is referred to as market structure. While markets can basically be classified by their degree of competitiveness and pricing, there are four types of markets i.e. perfect competition, monopolistic competition, monopoly, and oligopoly. In perfect competition markets, many firms are price takers whereas monopolistic competition markets are characterized by the ability of some firms to have market power. In contrast, oligopoly markets are those in which few firms can be price makers while monopoly market is where one firm can be a price maker.

Competitive rivalry: Airline industry can be characterized as imperfect oligopoly. There are several big airlines that dominate in long-distance flights and several smaller airlines compete for short-distance flights. The competition and price sensitive buyers lower the returns airlines receive. This market situation is favorable for a company like JetBlue, which differentiated itself by comfort at low price, but this can be easily duplicated by other companies.

What is a monopoly? According to Webster's dictionary, a monopoly is "the exclusive control of a commodity or service in a given market.” Such power in the hands of a few is harmful to the public and individuals because it minimizes, if not eliminates normal competition in a given market and creates undesirable price controls. This, in turn, undermines individual enterprise and causes markets to crumble. In this paper, we will present several aspects of monopolies, including unfair competition, price control, and horizontal, vertical, and conglomerate mergers.

Oligopoly Behavior in the Airline Industry. Case Analysis This case illustrates the pricing behavior of firms that are oligopoly whose market is characterized by the relative few participating firms offering differentiated or standardized products or services. Such firms in an oligopoly have market power derived from barriers of entry that wards off potential participants. As seen in the case, it is clear that because there are a small number of US Airlines firms competing with each other, their behavior is mutually interdependent – thus, the strategies and decisions by one airline management affect managements of the other airlines whose subsequent decisions then affect the first airline. In the airline industry, such oligopolistic

Market structure is when an industry has a number of firms making identical products. An industry’s market structure depends on the how many firms are in that in industry and how they will compete in the market.

Firms within the fast food industry fall under the market structure of perfect competition. Market structure is a classification system for the key traits of a market. The characteristics of perfect competition include: large number of buyers and sellers, easy entry to and exit from the market, homogeneous products, and the firm is the price taker. Many fast food franchises fit all or most of these characteristics.

The markets today are so complex and deal with so many variables it can be difficult to understand just exactly how they operate. In the following I will reveal the different kinds of market structures along with their different pricing strategies. Relating to these topics, I will focus on the importance of cost, competition and customer.

Monopolists derive their demand curve from the average revenue which is the price they receive per unit. To choose a profit maximizing output level monopolists use marginal revenue which is the change in revenue per unit increase. Since monopolists are the only seller in the market they are not affected by a supply a curve but by their marginal costs. Monopolists maximize their profits by equating their marginal revenue to their marginal costs. The golden rule for pricing for a monopolist is to ensure the price is higher than the marginal costs, but by an amount that is inversely related to demand so as to offset the traditional rules. This golden rule helps in understanding why monopolies occur in certain sectors which are very inelastic. The next section will provide a brief overview of the Standard Oil Monopoly.