Essay On Oligopoly

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INTRODUCTION This paper seeks to analyse the structure of the Indian aviation industry and seeks to question whether the airline industry fits into any particular market structure. The Indian transport sector was dominated by the Indian Railways for the longest time before the airline industry started to flourish. This new industry boasted of better quality of travel and reducing large distances to mere hours. However, the prices were much higher than the Indian society was used to. The peculiarity lay in the fact that an industry of this kind would not have been able to survive but it managed to, and even had a large market share in the transport industry. This is an attempt to understand how an oligopoly of such magnitude manages to function in India and whether it is a welfare model which caters to the needs of society at large. WHAT IS AN OLIGOPOLY? As was very aptly defined by P.C. Dooley “An oligopoly is a market of only few sellers, offering either homogenous or differentiated products. There are so few sellers that they recognise their mutual dependence.” An oligopoly is a market structure in which the number of sellers is limited to very few and this structure continues to persist due to the rigid character of this market structure. AN OVERVIEW OF THE AIRLINE…show more content…
The number of airlines that operate in India are few in number and cannot at any point, cater to the demand of the entire population in India. This is because of the inherent nature of the model of oligopoly which does not allow for new firms to enter the market. The other reason which is cited very often is the high costs and risk involved in such a market type. The costs of the carrier are high and their maintenance often exceed the revenue generated. The price of fuels and the constant fluctuation in the market also pose a major threat to an industry of this
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