Question

Pick a market that you believe exhibits the characteristics of an oligopoly. Based on what you have learned about an oligopoly, describe how the market you choose is an oligopoly. Do the firms co-operate, compete, or some of both?

Answer 1

The market that was an oligopoly was the market of big TV stations (ABC, CBS, and NBC). In oligopoly, a few large firms dominate the industry and these firms have the significant market share. There is a small group of companies that manage to shut all the competition from the market. These bigger firms have a large market share while the smaller firms operate in a more niche and specialized segments. Gasoline suppliers is another example of an oligopoly.

The companies within an oligopoly are considered competitors but they usually tend to cooperate with each other to benefit as a whole and as a result consumers are faced with higher prices. Hence, the firms in an oligopoly compete and cooperate with each other to benefit as a whole.

The market that is similar to oligopoly is a monopolistic type of market because both operate in an imperfect competition and both have downward sloping demand curves.