Why Prices Often Show Less Variation Under Oligopoly Than Under Other Types of Market Structure

Primarily an oligopolistic market can be defined in terms of its structure this means several things such as the number of firms within a specific market this also links very well with a second aspect

While companies that make up an oligopoly are competitors, they are acutely aware of the processes, systems, and actions of the other companies; therefore, the decisions and actions of one company usually influence and are influenced by the actions and decisions of other companies. These decisions and actions tend to restrict and limit the goods and services that are offered and can also lead to higher prices for

There are so many reasons why price wars can happen in an oligopoly market structure. Some of the reasons are due to

Oligopoly is a market structure in which a few firms dominate the market (Jocelyn Blink & Ian Dorton, 2012). The market may have a large number of firms or just a few, but the important idea is that the industry’s output is shared by a small number of firms. It is possible for oligopolistic industries to differ, in the sense that some industries would produce the same kind of products, where the product is practically the same and only the companies name is different. On the other hand, there are also industries that produce completely different product and also ones that produce products that are only a bit different from each other, but these firms do tend to spend most of their budgets to advertise their products (Jocelyn Blink & Ian Dorton, 2012). There are a few main characterises of firms that operate as oligopolies these include:

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

In these circumstances, the cost structures are not the same as with the competitive industry and so we cannot say that the oligopolistic firm results in higher prices than if a competitive market structure were to be adopted. In fact going along the theory of the downward sloping cost curve we can come to the conclusion that it would be the other way around and consumers would

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

A. firms in the industry have some degree of market power. B. firms in the industry are typically characterized by very diverse product lines. C. the actions of one seller have no impact on the profitability of other sellers. D. products typically sell at a price that reflects their marginal cost of production.

An Oligopoly refers to a market structure where-by the suppliers have formed some form of cartel and are acting in unison. In such a case the suppliers have the power to determine the price of the commodity and may set any price.

Barriers to entry - Sunk cost, technology, economies of scale, limiting pricing and brand loyalty of incumbents can all be barriers

There are four types of market structures: Monopolistic Competition, Monopoly, Oligopoly, and Perfect Competition. Monopolistic Competition is also known as competitive market. In this market structure, there are a large number of firms that produce similar but somewhat differentiated products for the same target customers. The market share is also divided among large number of firms making it difficult for one firm to become the market leader. On the other hand, Monopoly is a type of market structure in which only one firm controls the whole industry. There are strict barriers to entry for new firms due to governmental restrictions or the monopolistic power of the firm itself. In Oligopoly, the whole industry is dominated by a few large scale firms that set prices, introduce innovative products, and use heavy campaigns to attract buyers. All other small scale firms follow the changing market patterns set by these oligopolistic firms. Lastly, perfect competition is a market structure in which there are a larger number of firms that produce similar as well as differentiated products for

As illustrated by Sloman and Hinde (2007), an Oligopoly by nature has price stability, even when there has been no collusion between firms. This theory is based on two assumptions. For example, if Tate and Lyle were to lower their prices, British Sugar and the other rivals would feel the need to follow suit to prevent losing customers to Tate and Lyle. Contrastingly, if British Sugar raised their prices, Tate and Lyle would not follow suit. They would keep their prices the same and gain customers from British Sugar. The kinked demand model illustrates this.

The first company that comes to mind when I think of an oligopoly is the company Best Buy. Although Best Buy is apparently the leader in its market not, a couple decades ago there was more competition. Companies like Radio Shake and Circuit City were also majors players in the electronics department store arena. I was only a child when Best Buy began their take over, so I am not sure exactly what their marketing campaign was back then. I would however assume that whatever their marketing strategy was it was successful in attracting new customers who must have become brand loyal. I came to that conclusion simply because Circuit City and Radio Shack were both very well-known and industry leaders, 20 & 30 years ago and now they no longer

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.

b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.