Question

Identify a market dominated by an oligopoly. Justify your choice. How does your example fit the definition of an oligopoly?

Answer 1

The automobile manufacturing industry is said to be a best example of oligopoly market. Oligopoly is a market structure where few firms exist and offer similar goods to the customers. In Automobile sector there is only very few number of players. The few firms control the whole market. The firms which have the patent of the technology acts in the market. Thus entry of other firms is also restricted. Because of all these things we can say that it is a best example of oligopoly.

EXISTENCE OF FEW FIRMS

There are few players in the automobile industry. The most prestigious players in the industry are Tata motors, Hindustan motors, san motors etc. There are only limited number of players.

BARRIERS TO ENTRYA ND EXCIT

In the industry there are certain barriers for new firms to enter into the marker. It is not very easy to enter into automobile industry. The excising firms are very interdependent to each other.

HETEROGENEOUS

The automobile products offered by all the players are heterogeneous in nature. The products are similar in the features and usage. Oligopoly firms usually show this nature. Similarly in the automobile industry also the product offered by different firms has almost similar characteristics features.

ADVERTISING

The firms in the industry give frequent advertisements for their products. The firms in automobile sectors aims to attract more and more customers towards their product. Oligopoly firms also does the same.

INTERDEPENDENCE

Similar to oligopoly market the firms in automobile industry also depend each other for determining the price in the market. They stand jointly to earn maximum profits from the market.