Explain three key features of an oligopolistic market
Answers
Answered by
0
The Oligopoly Market: Example, Types and Features| Micro Economics!
The term oligopoly is derived from two Greek words: ‘oligi’ means few and ‘polein’ means to sell. Oligopoly is a market structure in which there are only a few sellers (but more than two) of the homogeneous or differentiated products. So, oligopoly lies in between monopolistic competition and monopoly.
Oligopoly refers to a market situation in which there are a few firms selling homogeneous or differentiated products. Oligopoly is, sometimes, also known as ‘competition among the few’ as there are few sellers in the market and every seller influences and is influenced by the behaviour of other firms.
Example of Oligopoly:
In India, markets for automobiles, cement, steel, aluminium, etc, are the examples of oligopolistic market. In all these markets, there are few firms for each particular product.
DUOPOLY is a special case of oligopoly, in which there are exactly two sellers. Under duopoly, it is assumed that the product sold by the two firms is homogeneous and there is no substitute for it. Examples where two companies control a large proportion of a market are: (i) Pepsi and Coca-Cola in the soft drink market; (ii) Airbus and Boeing in the commercial large jet aircraft market; (iii) Intel and AMD in the consumer desktop computer microprocessor market.
Types of Oligopoly:
1. Pure or Perfect Oligopoly:
If the firms produce homogeneous products, then it is called pure or perfect oligopoly. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly.
2. Imperfect or Differentiated Oligopoly:
If the firms produce differentiated products, then it is called differentiated or imperfect oligopoly. For example, passenger cars, cigarettes or soft drinks. The goods produced by different firms have their own distinguishing characteristics, yet all of them are close substitutes of each other.
3. Collusive Oligopoly:
If the firms cooperate with each other in determining price or output or both, it is called collusive oligopoly or cooperative oligopoly.
4. Non-collusive Oligopoly:
If firms in an oligopoly market compete with each other, it is called a non-collusive or non-cooperative oligopoly.
Features of Oligopoly:
The main features of oligopoly are elaborated as follows:
1. Few firms:
Under oligopoly, there are few large firms. The exact number of firms is not defined. Each firm produces a significant portion of the total output. There exists severe competition among different firms and each firm try to manipulate both prices and volume of production to outsmart each other. For example, the market for automobiles in India is an oligopolist structure as there are only few producers of automobiles.
The term oligopoly is derived from two Greek words: ‘oligi’ means few and ‘polein’ means to sell. Oligopoly is a market structure in which there are only a few sellers (but more than two) of the homogeneous or differentiated products. So, oligopoly lies in between monopolistic competition and monopoly.
Oligopoly refers to a market situation in which there are a few firms selling homogeneous or differentiated products. Oligopoly is, sometimes, also known as ‘competition among the few’ as there are few sellers in the market and every seller influences and is influenced by the behaviour of other firms.
Example of Oligopoly:
In India, markets for automobiles, cement, steel, aluminium, etc, are the examples of oligopolistic market. In all these markets, there are few firms for each particular product.
DUOPOLY is a special case of oligopoly, in which there are exactly two sellers. Under duopoly, it is assumed that the product sold by the two firms is homogeneous and there is no substitute for it. Examples where two companies control a large proportion of a market are: (i) Pepsi and Coca-Cola in the soft drink market; (ii) Airbus and Boeing in the commercial large jet aircraft market; (iii) Intel and AMD in the consumer desktop computer microprocessor market.
Types of Oligopoly:
1. Pure or Perfect Oligopoly:
If the firms produce homogeneous products, then it is called pure or perfect oligopoly. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly.
2. Imperfect or Differentiated Oligopoly:
If the firms produce differentiated products, then it is called differentiated or imperfect oligopoly. For example, passenger cars, cigarettes or soft drinks. The goods produced by different firms have their own distinguishing characteristics, yet all of them are close substitutes of each other.
3. Collusive Oligopoly:
If the firms cooperate with each other in determining price or output or both, it is called collusive oligopoly or cooperative oligopoly.
4. Non-collusive Oligopoly:
If firms in an oligopoly market compete with each other, it is called a non-collusive or non-cooperative oligopoly.
Features of Oligopoly:
The main features of oligopoly are elaborated as follows:
1. Few firms:
Under oligopoly, there are few large firms. The exact number of firms is not defined. Each firm produces a significant portion of the total output. There exists severe competition among different firms and each firm try to manipulate both prices and volume of production to outsmart each other. For example, the market for automobiles in India is an oligopolist structure as there are only few producers of automobiles.
Similar questions