Question

In: Economics

describe the various ways in which firms within oligopolistic market structure exercise their market power answer...

describe the various ways in which firms within oligopolistic market structure exercise their market power

answer with your own word ( 200 words )

Solutions

Expert Solution

The oligopolistic environment consists of few marketers/producers which influence the supply and price of goods/service in a given economy. These few producers cooperate with each other to benefit as a whole in the market, this can influence the price. Examples of the oligopolistic economy are News media and National mass media, Operating systems of smartphones and computers and automobile companies. Like monopoly, Oligopoly also has a relatively high barrier for new entrants.

The firms within the oligopolistic market structure exercise their market power as -

  • The producers that exist in an oligopolistic market are the price & trend, and generally, form partnerships and deals that develop prices that are higher than the competitor's marginal costs. oligopoly companies set prices to escalate their own profit. Ultimately, it lends to partnerships and collaborations that foster success for themselves and other firms, specifically smaller companies operating within the same market or industry.
  • The producers that exist in an oligopolistic market are the price & trend, and generally, form partnerships and deals that develop prices that are higher than the competitor's marginal costs. oligopoly companies set prices to escalate their own profit. Therefore it leads to partnerships and collaborations that promote success for themselves and other firms, specifically smaller producers operating within the same market/industry.
  • It is difficult to find a way for the new entrants into oligopolistic markets that already exist. It is because of two significant factors: few well-established and successful large companies already dominate the space and the companies which offer well-known goods/services.
  • For new producers with similar goods/services, making a tunnel into an oligopolistic market is difficult. The only new entrant that manage to do so are those with significant funding; an oligopolistic market requires large amounts of capital to operate because the economies of scale generally ensure that there is no change in the status of the existing companies.

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