It Has Been Argued That the Uk Banking System Is an Oligopoly
Question 1
It has been argued that the UK banking system is an oligopoly ( http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8266582/Big-banks-running-an-oligopoly-says-Virgin-Money-chief.html# ) .
a) Using appropriate diagrams and economic research critically discuss the extent to which this is the case
b) What are the likely implications for consumers?
+ http://economicsonline.co.uk/Business_economics/Oligopoly.html The UK banking system is an Oligopoly because there are a small number of companies in the industry to allow barriers to be raised against the entry of new firms. ‘It’s important that we have to make sure there’s no banks too big to fail’ (article). Although in an oligopoly its known for having just a few big firms in the industry the ‘virgins money chief’ thinks that banks should not be that big ‘I do believe banks should be smaller than the very big ones today’( article), she believes that by having smaller banks there will be more competition which could allow consumers to get the best deal due to more price discrimination and this would make the companies very competitive. In an oligopoly the companies produce almost identical goods, for example all the banks offer very similar if not the same services. ‘Its hard to say the market customers should be enjoying is in any way properly competitive , so that consumers get the best deal’ (article). This shows that although the banking industry has competition to some degree, it is not as competitive as it should be. Most of the competition between the companies in an oligopoly is in the marketing aspect of their particular brand. ‘Spending on advertising, sponsorship and product placement - also called hidden advertising – is very significant to many oligopolists. The UK's football Premiership has long been sponsored by firms in oligopolies, including Barclays Bank and Carling.’ (Higson, G. http://economicsonline.co.uk/Business_economics/Oligopoly.html) being
It has been argued that the UK banking system is an oligopoly ( http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8266582/Big-banks-running-an-oligopoly-says-Virgin-Money-chief.html# ) .
a) Using appropriate diagrams and economic research critically discuss the extent to which this is the case
b) What are the likely implications for consumers?
+ http://economicsonline.co.uk/Business_economics/Oligopoly.html The UK banking system is an Oligopoly because there are a small number of companies in the industry to allow barriers to be raised against the entry of new firms. ‘It’s important that we have to make sure there’s no banks too big to fail’ (article). Although in an oligopoly its known for having just a few big firms in the industry the ‘virgins money chief’ thinks that banks should not be that big ‘I do believe banks should be smaller than the very big ones today’( article), she believes that by having smaller banks there will be more competition which could allow consumers to get the best deal due to more price discrimination and this would make the companies very competitive. In an oligopoly the companies produce almost identical goods, for example all the banks offer very similar if not the same services. ‘Its hard to say the market customers should be enjoying is in any way properly competitive , so that consumers get the best deal’ (article). This shows that although the banking industry has competition to some degree, it is not as competitive as it should be. Most of the competition between the companies in an oligopoly is in the marketing aspect of their particular brand. ‘Spending on advertising, sponsorship and product placement - also called hidden advertising – is very significant to many oligopolists. The UK's football Premiership has long been sponsored by firms in oligopolies, including Barclays Bank and Carling.’ (Higson, G. http://economicsonline.co.uk/Business_economics/Oligopoly.html) being