International School Market in Shanghai Fit the Market Structure of Oligopoly
Title: To what extend does the international school market in Shanghai fit the market structure of Oligopoly?
Subject: Economics
Essay by Pearl
Session: May 2011
Words count: 3639
Hypothesis: My hypothesis is that the international school market in Shanghai is non-collusive oligopoly.
CLASSIFICATION OF MARKETS - OLIGOPOLY
Oligopoly means “few sellers”(McGee, p.201). The market which is another structure of non-price competition, lies in-between “ the extremes of perfect competition and monopoly”(McGee, p.201). The different between Oligopoly and monopolistic competition is small, and many of the markets contain components of both (McGee, p.201). The diagram below demonstrates concentration of market shares or sales in different market structures of largest 4 firms (CR4) in percentage.
[pic]
Diagram 1 (Blink, Dorton, p.119)
CR4 is the most commonly used form of concentration ratio. CRx where x represents the number of largest firms. Therefore, CR4 would show the percentage of market share held by the largest 4 firms in the industry.
3
A) ASSUMPTIONS OF MODEL
The key feature of the Oligopoly market is that the market is dominated by few large firms. Oligopoly can be defined by the characteristic of number and size of firms, barriers to entry, product differentiation, control over price, selling activity and nature of demand.
1. Number and size of firms
A few large firms dominate the market with maybe many other smaller competitors covering the rest of the market. “Standard economic theory defines an oligopolistic market as one where the four or five largest firms control a major share of the market”(McGee, p.201).
From economicshelp, the market concentration ratio is “the percentage of total sales in the market taken up by a certain number of firms”. This is used to define market structure and competitiveness of the market. To calculate the concentration
Subject: Economics
Essay by Pearl
Session: May 2011
Words count: 3639
Hypothesis: My hypothesis is that the international school market in Shanghai is non-collusive oligopoly.
CLASSIFICATION OF MARKETS - OLIGOPOLY
Oligopoly means “few sellers”(McGee, p.201). The market which is another structure of non-price competition, lies in-between “ the extremes of perfect competition and monopoly”(McGee, p.201). The different between Oligopoly and monopolistic competition is small, and many of the markets contain components of both (McGee, p.201). The diagram below demonstrates concentration of market shares or sales in different market structures of largest 4 firms (CR4) in percentage.
[pic]
Diagram 1 (Blink, Dorton, p.119)
CR4 is the most commonly used form of concentration ratio. CRx where x represents the number of largest firms. Therefore, CR4 would show the percentage of market share held by the largest 4 firms in the industry.
3
A) ASSUMPTIONS OF MODEL
The key feature of the Oligopoly market is that the market is dominated by few large firms. Oligopoly can be defined by the characteristic of number and size of firms, barriers to entry, product differentiation, control over price, selling activity and nature of demand.
1. Number and size of firms
A few large firms dominate the market with maybe many other smaller competitors covering the rest of the market. “Standard economic theory defines an oligopolistic market as one where the four or five largest firms control a major share of the market”(McGee, p.201).
From economicshelp, the market concentration ratio is “the percentage of total sales in the market taken up by a certain number of firms”. This is used to define market structure and competitiveness of the market. To calculate the concentration
Bibliography: 15 APPENDICES 16 ----------------------- As shown in the diagram 2, Profit maximization is where MC = MR. “The profit-maximizing output is Q and the price is P. The profit per unit of producing Q is the different between AR and AC. Thus the profit per unit is a - b. Since Q units are produced, the total abnormal profit is the shaded area. Whether abnormal profit is made will depend upon the position of the AC curve.” (Blink, Dorton, p.93) b a