Question

MARKET COMPETITION COMPARISON

You are assigned to an Oligopoly company that produces widgets and you are computing the same Oligopoly company. I will purchase widgets from the firm with the lowest price within each of the categories below. The highest price I will pay per widget is $1. Regardless of your price offered, you are to assume a normal profit is maintained.

At the conclusion of this exercise, you will submit a brief analysis of the process and market characteristics.

Answer 1

First of all we nned to understand the meaning of Oligopoly market.

OLIGOPOLY MARKET: Oligopoly is a market situation in which there are few firms selling homogenous or heterogenous products with some substitutes available in the market. There are very few firms in the market , it is also known as the copetition among few, When there is a change in the price of one firm there is an affect on the other means there is much competiton in this kind of market becuase while decreasing the price own product company won't get increase in the demand of its prduct because the rivalry firms will also decrease in the price with the same extent. There is also restriction in the entries of new firms in the market.

Characteristics of the oligopoly market:

1. The firms are less but very large firms.
2. They produce identical means same or differential products.
3. There are barriers in the entry of the firms because a firms needs huge amount for establishing a big firms which let's small firms not to enter in the market.
4. There also exist price rigidity because they know that variationT in the price won't help them.
5. They may prefer to stick with the same prices level to prevent entering new firms from entering in the industry.