Question

Case:

A school decided to divide a parking into two parts and give it to two companies to manage. One company manages the parking infront of the school and the other company manages the parking behind the school. So now both companies has to face competition in the market. Assume that you are in the company that is given the parking infront of the school to manage.

question: explain to the company you are in and what kind of compeition it will face with the other company and how will it effect profit of the company you are in?

draw table and show effect on profits relation to the cost

Answer 1

In the above condition there would be oligopoly or oligopoly competition.

In oligopoly there are less firms which exists in the Market.

A duopoly is a form of oligopoly, and should not be confused with monopoly, where only a single producer exists and controls the market. With a duopoly, each company will tend to compete against the other, keeping prices lower and benefiting consumers.

Considering the above situation the profits of the firm would be effected as -

If the competitor charges lower rates to the customers for parking then our company will also have to reduce the prices otherwise the customers would go to the competitor due to less prices charged by them.

Or if the competition provides better services then our company then also we will loose customers but providing more facilities at a lower price is also very difficult as more expenses would be made and less revenue would not benefit the company.