Question

Explain why the Commerce Commission regulates oligopolists’ behavior. In particular, consider what might happen if there were no law prohibiting anticompetitive behavior (such as price-fixing, exclusive dealing, etc.) by firms, and how this would affect consumers in oligopolised markets.

Word count - 450 words

Answer 1

Commerce Commission regulates oligopolistic behaviour because sometimes the oligopolist behaviour creates a type of monopoly situation in the market and it will decrease the interest of the consumer because oligopoly is that market situation where a few sellers are selling very close substitute of the commodity and the price they decided is based on the prices considered by the oligopoly firms.
In the oligopolistic market, the concept of price rigidity is applicable and sometimes it is converted into a cartel situation then it creates a problem for the consumers.
If there is no law prohibiting anti-competitive behaviour such as price-fixing exclusive dealing by firms then it affects the consumers in the oligopolistic market because the oligopolistic market is that market where the influence of the product is very high and all the forms want to to do some joint price make in policies for survival because then a fusion of capital in this market is very high and this is the only reason if there is no law then it will affect the purchasing power capacity of the consumer.
The purchasing power of consumer is totally depend on the price of the commodity charged by the seller and the utility of the commodity so in oligopolistic market generally commodity is selling by only few sellers so when there is no competition then the price is fixed and known to both seller and consumer but if there is a high level of competition then the benefit directly goes to the consumer but in some cases when all the oligopoly firms come together and make a cartel so that it is like a Monopoly condition in the economy then the consumer or the buyers have no choice to purchase the commodity in some other price in this particular situation consumers are bound to purchase the commodity at a price specified by the oligopoly firms so therefore it is necessary for the government to interrupt the situation and to obstruct the formation of price fixing or exclusive dealing like anti competitive behaviour because anti-competitive behaviour is very dangerous for the market orientation and the development of market in healthy environment and it is also not a good policy in terms of the economic development and in favour of consumers the main priority of the government is to increase the competitive attitude in the market and to raise the quality of the product under a controlled price.
There are various benefits of the competitive spirit in the firms it raises the quality of the product that increases the innovation of the product and it is helpful for the healthy development of the market in a structured manner and it is beneficial for all the stakeholders of the economy that is the consumer the producer the seller the competitors and the government.