Oligopoly Market Structure

Topics: Monopoly, Economics, Supply and demand Pages: 9 (2734 words) Published: September 26, 2010
Running Head: Marketing Structures

Toyota as an example of an oligopoly market structure



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Toyota as an example of an oligopoly market structure3
1.1 Terminologies of market structures3
1.11 Perfect competition4
1.12 Monopoly4
1.13 Monopolistic competition4
1.14 Oligopoly4
2.1 Characteristics of an Oligopoly6
2.2 Toyota Motor Company’s Kinked Demand Curve Model7
2.3 Recommendations on pricing strategies9
2.31 Formation of a cartel9
2.32 The Dominant Firm model10
Toyota as an example of an oligopoly market structure


The establishment of a new business firm into the production of goods into the market that already has other players greatly depends on the prevailing market forces. For instance, if an already existing firm has taken up the production of a particular product such that other entrants have a hard time marketing the same kind of product then market forces will favor the first firm. The main agenda for any firm that comes first is to maximize its profits with an eye to maintain a certain large portion of the market. When the business identifies itself with a certain market structure in tandem with its mission, it can bring in managerial models that will keep it afloat with the single objective of profit maximization. Market structures are presented according to either government policy or as a matter of competition in the market players for a particular line of production. For example some firms opt to ply their trade in highly competitive sectors such as agriculture and foreign dealing. This means that any decisions that will be made might not be as a factor of government policy but rather as conditioned by the prevailing market in which it operates. Market structures can be such as perfect competition, monopoly, monopolistic competition and oligopoly which could otherwise not exist if firms did not come up with ideas to topple others from their already established bases.

1.1 Terminologies of market structures

With reference to market structures, it is important to put the degree and nature of competition into focus in order to have a clear picture of what a particular market can be classified as. For capitalistic economies, a range of different market structures can be used to describe the nature and level of competition (Vives, 2007). These market structures include the following:

1.11 Perfect competition

This kind of market structure has many buyers and sellers who lack the power to influence the market price at an individual level. This means that for the firm operating in a perfectly competitive market there is chance to mark up a price greater than that for its competitors because it will mean going out of business altogether. Companies in this market structure have free exit and entry.

1.12 Monopoly

This is a market structure where there is only one supplier for particular goods and services for the whole market. In such a structure there are no close substitutes for the same goods and services either due to government policy or market forces. These companies have absolute economies of scale by their mere existence.

1.13 Monopolistic competition

In this structure there are many firms producing different products within the same sector. For example, there can be many firms in clothing and hairdressing but still be governed by the versatility of that sector. It is more of monopoly only that there exists more than one supplier

1.14 Oligopoly

In this market structure there are a few interdependent firms that dominate the market. For example, the oil and banking business is known to be dominated by certain firms around the world who only react to actions made by...

References: Brown, M., & Chiang, S. H. (2003). Coalitions in monopolies: An itroduction to the sequential procedures (Contributions to economic analysis). Conecticut, USA: JAI Press.
Eichner, A. (2008). The megacorp and oligopoly: Micro foundations of micro dynamics. London: Cambridge University Press.
Lahiri, S. (2007). Trade and industrial policy under iternational policy. London: Cambridge University Press.
Ohno, T. (1998). Toyota production system: Beyond large-scale production. Massachusetts: Productivity Press.
Vives, X. (2007). Information and learning in markets: The impact of market microstructure. New Jersey: Princeton press.
Vives, X. (2001). Oligopoly pricing: Old ideas and new tools. Massachusetts: MIT Press.
Zachary, G. P. (1999). Lets play oligopoly!: Why giants like having other giants around. Wall street journal , 47-53.
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