Question

1.      Find and describe an example of Oligopoly in Omani economy.

In your answer you shall mention:

a)      Definition of Oligopoly and its main characteristics and conditions.

b)      Name the industry where the Oligopoly exists.

Provide proofs that named industry has Oligopoly with reference to characteristics and conditions stated in (a).          

                                              

Answer 1

a) Oligopoly

The word Oligopoly is derived from two Greek words – ‘Oligi’ meaning ‘few’ and ‘Polein’ meaning ‘to sell’.

Few firms -An oligopoly is an industry which is dominated by a few firms. In this market, there are a few firms which sell either homogeneous or differentiated products.

Interdependence - As there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it.

Barriers to entry - In an oligopoly, there must be some barriers to entry to enable firms to gain a significant market share. These barriers to entry may include brand loyalty or economies of scale.

Oligopoly can be either perfect(homogeneous products) or imperfect(differentiated products)

b) Oman's private sector remains dominated by a handful of rich families, who run in collaboration with government run enterprises.

One such industry is automobile/dealership industry, dominated by few players like Mohammed Al Zubair and Mohammed Bahwan.

Or even the oils and mineral industry with few rich players like Sultan Qaboos and Mohammed Al Barwani.

The oil and mineral industries are interdependent as they often work in cartel, and set their prices and quantity in negotiation with the OPEC.

There are barriers to entry in the oil and mineral industry as the it requires a large scale business which can only be run with huge wealth, government liscencing and othr natiral resources, thus dettering new players.

Similar arguments can be made for the automobile industry.

Hope, this answer helped you :)