The Oligopoly Theory

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Running head: Oligopoly Theory The Oligopoly Theory OPERATIONS MANAGEMENT Table of Contents Abstract…………………………………………………………………………………………3 Introduction…………………………………………………………………………………….4 Oligopolistic Competition……………………………………………………………………...5 Characteristics of an Oligopoly…..………………………………….………………………....6 Models of Oligopoly Behavior…………………………………………………………………9 Conclusion….………..………………………………………………………………………...11 References……………………………………………………………………………………..12 Abstract The goal of this research paper is to provide an overview of the theory of oligopoly and its effect on the global economic stage. We will review what results when there are fewer companies in…show more content…
When a company suddenly loses market share, which is tantamount to a company eventually closing its doors. Hence, when one a company lowers its prices, increases its ability to produce or opens a new channel, it forces the other companies to react accordingly or risk losing market share (Dubovik & Janssen, 2011). Interestingly enough, this mimicking behavior creates an “interdependence” among the oligopolistic companies. Economists, due to this behavior of these companies, have been incapable of developing a respectable oligopoly theory. Since there are only a limited number of competitors, these companies are acutely aware of the resulting effects of their decisions has on the other companies. Characteristics of an Oligopoly According to Salvatore, the oligopoly market structure is most predominant in the manufacturing segment of the industrialized countries which includes the United States (2007). Some types of oligopoly companies are “steel, automobiles, aluminum, soaps and detergent, glass, cigarette, electrical equipment and breakfast cereals” (Salvatore, 2007). The following are some of the recurring characteristics of an oligopoly: (1) only a few firms participate in a particular market place but bigger than the typical company as it pertains to the size of the companies, (2) these firms offer similar products and/or services or somewhat
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