They combine together to avoid competition among themselves regarding price and output of the industry. • Non-Collusive Oligopoly – a market situation where there is no agreement among the firms, hence each firm acts independently. 2. Characteristics of Oligopoly a. Very few sellers of the product The number of sellers dealing in homogenous or differentiated product is very small that the pricing and output policy of the individual firm can influence the industry price and output.
Because of product differentiation, a firm in monopolistic competition faces a downward-sloping demand curve. So, the firm can set both its price and its output with a trade-off between the product quality and price. A firm that makes a high-quality product can charge higher price than a firm that makes a low-quality
Product differentiation is a development or incorporation of attributes which includes benefits, price, quality, styling, services and etc. that a product’s intended customers perceive to be different and desirable. Advertising and promotion of a product is based on its differentiating characteristics. One real example which a firm differentiate their product is Airstream. Airstream’s top competitors is
For competitive market, producer surplus = zero while for monopolistic market, producer surplus = the abnormal profit represented with the shaded area B in figure 1. Deadweight loss is represented by the shaded area C in figure 1 is the welfare loss under monopolistic market as a result of insufficient output when compared with competitive
An oligopoly is an intermediate market structure between the extremes of perfect competition and monopoly. Oligopoly firms might compete (noncooperative oligopoly) or cooperate (cooperative oligopoly) in the marketplace. Whereas firms in an oligopoly are price makers, their control over the price is determined by the level of coordination among them. The distinguishing characteristic of an oligopoly is that there are a few mutually interdependent firms that produce either identical products (homogeneous oligopoly) or heterogeneous products (differentiated oligopoly) (Rajeev K. Goel, 2014, P183) There are two main characteristics of oligopoly, including small number of firms and interdependence. There are only a few manufacturers in the industry.
The easier for a firm to join the marketplace, the higher the risk of a business’s market share being depleted. Barriers to entry include economies of scale, government policies, patents and proprietary knowledge, capital requirements, switching costs and so
There are two different types of competition in a market, monopolistic competition and free competition or also known as perfect competition. An example of a monopolistic competition or monopoly is the market in China, where only one company or firm distributes resources and good. An example of a perfect competition is the United States or Singaporean market in which people are free to enter or exit the market. The question is, is a free market competition better than a monopolistic market competition? A free market competition is better than a monopolistic competition because there is little constraint for people to enter or start a business in the market and consumers are able to set the price based on the demand vs. supply concept.
According to Nellis & Parker (2006), monopolistic competitive markets exist where there are many organisations selling products or services that are comparable, but have slight degrees of differentiation from each other. Nellis et al, further elaborate on the pricing discretion, stating that it is limited and consumers within this market can switch to alternative suppliers according to their needs and desires. (Nellis & Parker. 2006) Nellis & Parker (2006) described the conditions and circumstances that lead to a monopolistic competitive market, these include: 1. A large number of organisations competing: AIC competes against a collective of 93 licensed insurance companies trading.
Monopoly Vs Oligopoly: MONOPOLY: It is a situation in which a single company or a collection owns all or nearly all of the market for a given type of product or service. Monopoly is characterized by an absence of competition, which can result in high inferior