Advantages Of Oligopoly

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Oligopoly is a form of market structure where less than two firms are dominating the market. The market is controlled by a small group of two or more firms. It admits that the price of a firm affects the profit of the other firm. The firms can agree to price collusion and create barriers to entry for new firms. If the firm do not agree and create barriers to entry for new firms then, they will tend to lower their prices and open the market for newer firms. For example, in Kampala City, the large mineral water firms: Wavah Water and Rwenzori dominate the market. Rwenzori Beverage Company was established in 1993, and has held a market leadership in Uganda and its neighboring countries. Rwenzori Beverage Company is one of the prominent producers of…show more content…
The assumptions of monopolistic competition are as follows:
• The industry is build of large number of firms
• Firms are free to enter or leave the industry
• All firms produce slightly differentiated products
• Price maker
Like perfect competition, there are no barriers to entry or exit. Though unlike perfect competition the products are not identical, competitors sell products that are differentiated from one another. More like Monopoly, in Monopolistic Competition the firms are price makers thus the producers decide the products’ prices. Oligopoly is a market structure where its challenge is between monopoly and monopolistic competition. The market is dominated by a few firms; firms either sell identical or differentiated products. There are significant barriers to entry, meaning that other firms won’t be able to enter the industry thus firms can make supernormal profit in the long run. The firms react to rival’s change in price and output; therefore they practice non-price competition, such as:
• Gaining customer reliability
• Price collusion
• Additional services and advertisings to appeal
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