Question

Respond to the following in a minimum of 100 words:

Discuss the market model, oilgopoly and provide an example of a real-world market that matches the market model you chose. What does economic theory teach you about the industry you chose?

Answer 1

Oligopoly as we know is market structure with a small number of firms, none of which can keep the others from having significant influence. The concentration ratio measures the market share of the largest firms. Oligopoly is when a small number of firms collude, either explicitly or tacitly, to restrict output and/or fix prices, in order to achieve above normal market returns.

Oligopoly is an important form of imperfect competition. When there are two or more , but not many, producers or sellers of a product, oligopoly is said to exist. Oligopoly is also often referred to as " competition among the few". The simplest case of oligopoly is duopoly which prevails when there are only two producers or sellers of a product.

The main features of oligopoly:-

Interdependence.

Importance of Advertising and selling costs.

Group Behavior.

Economies of scale.

Barriers to entry.

There are two types of oligopoly market structure like

Collusive oligopoly.

Non collusive oligopoly.

Price leadership.

Cartels.

Automobile manufacturing is a real world example of oligopoly.with the leading auto manufacturers in the United States being Ford (F), GMC, and Fiat Chrysler. While there are smaller cell phone service providers, the providers that tend to dominate the industry are also examples of oligopoly.

The economic theory about oligopoly usually refers to the partial equilibrium study of markets in which the demand side is competitive, while the supply side is neither monopolized nor competitive. It is exclusively concerned with single period models.

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