Question

Hello!

I need an essay of at least 500 words long about an oligopolistic market structure. Thanks

Answer 1

There are a few interdependent companies dominating the market in an oligopoly market system. Depending on their rivals, they may alter their prices

The Oligopoly Market characterized by few sellers, selling the homogeneous or differentiated products. In other words, the Oligopoly market structure lies between the pure monopoly and monopolistic competition, where few sellers dominate the market and have control over the price of the product.

1. Interdependence

There are a few interdependent companies that are unable to behave separately. Companies working in an oligopoly market with a few competitors must take into consideration when making their own choices the prospective reaction of their nearest rivals.

2. Barriers to Entry

There are a few entry and exit barriers. For companies to be feasible, some of these markets involve big economies of scale. They might also need scarce funds to function at an airport like slots. Companies often attempt to reduce their prices to discourage fresh entrants as much as possible. They also advertise strongly and use loyalty programs frequently.

3. Information

The market is defined by incomplete understanding, where the highest price or availability is not known to clients.

1. Total Revenue – Total Quantity x Price.

2. Marginal Revenue – the revenue earned by selling one more unit.

3. Average Revenue – total revenue/quantity. Since all the units are the same price, each new unit would have the same average revenue, so the marginal revenue = total revenue.

Because companies are interdependent, they have the option to compete or collaborate with other companies. They may boost their own market share at the cost of their rivals by competing, but by working together they reduce uncertainty and the companies can act as a monopoly together.

Under the Oligopoly market, a firm either produces:

Homogeneous product- Homogeneous products manufacturing companies are called Pure or Perfect Oligopoly. It is discovered in industrial products manufacturers like aluminum, copper, steel, zinc, iron, etc.

Heterogeneous Product- The firms producing the heterogeneous products are called as Imperfect or Differentiated Oligopoly. Such type of Oligopoly is found in the producers of consumer goods such as automobiles, soaps, detergents, television, refrigerators, etc.