The Economic Structure of OPEC
For: Professor John Zink
Economics for the Global Manager
By: Maria A. Journiette
August 31, 2007
Many companies operate under a monopoly which gives them an edge or a corner on the market. In this discussion we will focus on the differences between a monopoly, oligopoly, and a cartel. We will also look at what game theory is and its affect on monopolies and cartels and the welfare affect of each of the above mentioned.
A monopoly is defined as, "sole control of a particular line of goods or services in a given market or the means to control distribution and price."(Webster's, 2000) In a monopoly situation there is only one person with a particular good or service and because of this they can price their product accordingly. A good example of a monopoly in the Cincinnati area is the local grocery chain Kroger's which is headquartered in downtown Cincinnati, Ohio. Other grocery chains such as Biggs's and Meijer's were not able to build in certain areas near where a Kroger's store was already located. For many years Kroger's was the largest grocery chain in the area and many of their products were overpriced because they were the only store that sold certain items. Another example would be the cable company or provider in your area, here Time Warner is the only cable provider in the Cincinnati, Kentucky, and Dayton area. An oligopoly is defined as, "a market that is dominated by a few large suppliers."(Webster's 200) A great example would be the automobile industry. The parts needed are usually supplied by a large supplier such as Delphi with the Chevrolet and GMC automobiles. Other suppliers just do not carry or make the parts they demand.
A cartel is a "combination of independent commercial or industrial enterprises designed to limit competition or price fixing."(m-w.com, 2007) A great example of this would be the telecommunication industry and the continuous merging. Let's say for example the...
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