Oligopoly

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TABLE OF CONTENT

* Executive Summary
* Oligopoly
* Definition
* Oligopolistic competition
* Characteristics of Oligopoly
* Similarities & Differences between Monopoly & Oligopoly * Effects of Oligopolistic Competition
* Models Defining Oligopoly
* Dominant Firm Model
* Cournot – nash Model
* Bertrand Model
* Kinked Demand Curve
* Game Theory
* Price and Non – Price Competition
* Price Leadership
* Worldwide examples of Oligopoly
* Australia
* Canada
* United Kingdom
* United States
* Others
* Examples of Oligopoly in Pakistan
* Details Analysis of Automobile industry of Pakistan
* Conclusion
* References

EXECUTIVE SUMMARY

Oligopoly is a market form, in which few sellers dominate the complete market. Oligopoly is slightly different from monopoly, in monopoly market is ruled by a single seller and consumers or buyers have no other choice, where as in oligopoly consumer have choice but very few, usually a seller creates its brand value and gain customer loyalty. In oligopolistic competitions possess certain obvious characteristics the cartel can set prices, entry and exit is difficult for a seller from the market, each firm influence the other firm, oligopolies can also maintain long run profits as the entry of new firms is difficult. The most distinctive feature of oligopoly is interdependence as each firm is large enough that its action will affect the market. Oligopoly has certain negative and positive effects on the consumer and market. Barrier on the entry of new products and seller reduces choice and variety for customer and less investment too, other negative effect is the influence of sellers on the price which is a nightmare for consumers. On the other hand the positive effects are the competition among the sellers that gives better product, and oligopolists are main contributors of national income. There are different models that help understand oligopoly like dominant firm model, cournat nash model, Bertrand model and kinked demand curve model. All of these explain the relationship between the price and quantity of sale in oligopolistic competition. Game theory also helps defining oligopoly, game theory is where decision of one player or interactive decision of two players gives a certain outcome the effects not just the decision taking players but also the other players involved in the game

To capture the environment in an oligopoly form of market firms also tries price competition and non – price competition. Price competition is where the firms reduce prices or give discounted deals to capture more market and non-price competition is where firms adopt extensive marketing, added features to the product etc etc for the same purpose that is to capture market. If a single firm is the most dominant in the market it may experience price leadership as well. Different countries face oligopoly in different industries even the developed countries face oligopoly, so does Pakistan in different industries. Most distinctive industry that faces oligopoly in Pakistan is Automobile industry in which the market of cars is dominated by Suzuki, Toyota and Honda. Where as Suzuki capturing the major share and Toyota having almost equal share as Suzuki. Automobile industry contributed GDP till 2.6% in 2005-2006 and by the end of 2012 it is expected to contribute around 5.7% of GDP In trucks and buses the firms which dominate the Pakistani market are Hino, Nissan, Master and Isuzu. Its hard to ensure a stable environment in the given economic condition but still Pakistani automobile industry is expected to contribute more in national income and stability.

OLIGOPOLY

OLIGOPOLY

Definition
An Oligopoly is a market form, in which market or industry is dominated by few numbers of sellers usually more than one and less than known as Oligopolists. The word oligopoly is derived by analogy with monopoly, from the Greek...
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