Question

In: Economics

please select an industry in which oligopoly exists. Present the reason(s) why you believe an oligopoly...

please select an industry in which oligopoly exists. Present the reason(s) why you believe an oligopoly exists in this industry. Next try to imagine how one of the firms in this industry (name any of the major firms in the industry) may be operating as a typical oligopolist. While your answer will be speculative, explain why the behavior you describe would be consistent with the chapter description of how an oligopolist would act.

Solutions

Expert Solution

Oligopoly consists of a few companies having greater influence over an industry. They cooperate with each other in order to reap the benefits even though they are considered as competitors with in the specific market. One of the common industry in which oligopoly exists is the automobile industry . The US automobile industry consists of three major firms, General Motors, Ford and Chrysler.

Reasons for the existence of oligopoly in automobile industry are

1. Requires large investment of capital.

In an industry where the addition to output may likely depress prices, no entrepreneurs will like to venture to invest large sums. Further, they also fear of provoking a price war by the established firms. It is difficult to make a new product in the midst of differentiated products.

2. Economies of scale

Very few firms will survive in those industries where there is a lot of mechanisation and requirement of large scale economy. Only a few firms can satisfy the entire demand.

3. Barriers to entry

It is difficult to enter in to an automobile industry because of the requirement of large amount of capital. This is also combined with the difficulty of marketing new products in the presence of already established brands. They may be afraid of the price war as well.

A vivid dynamic relationship between price leaders and price followers can be found in the automobile industry. Let General Motors be the price leader. Now Chrysler announce the price increase after that the General Motors announced the price increase which was smaller than Chrysler 's . General Motors move then will lead to Chrysler to reduce its own price

When it comes to the pricing decisions oligopolists acts like a single monopolist. They want to maximise the joint profit instead of firm's single profit. Thay set the collusive price.


Related Solutions

Select one (1) industry or sector in Malaysia which you believe will be the most positively...
Select one (1) industry or sector in Malaysia which you believe will be the most positively or negatively affected by COVID-19 in year 2021? Justify the industry or sector selection with detail analysis (glove manufacturing industry).
1. Which of the following is a reason why brands matter to consumers? Select one: a....
1. Which of the following is a reason why brands matter to consumers? Select one: a. means of legally producting unique features b. source of competitive advantage c. source of financial returns d. risk reducer 2. A product so basic that it cannot be physically differentiated in the minds of consumers is a(n): Select one: a. credence product b. commodity c. convenience good d. shopping good 3. A customer who regularly buys Pink from Victoria's Secret is expressing brand: Select...
Do you believe the reason why Management Information Systems are very important in the day to...
Do you believe the reason why Management Information Systems are very important in the day to day operation of companies is because these systems work with people, organizations, technology and relationships among the people and organizations affecting the company?
provide 5 examples of an oligopoly. please explain why each example is an oligopoly.
provide 5 examples of an oligopoly. please explain why each example is an oligopoly.
Why are there only a small number of businesses in the oligopoly industry, such as 2-3...
Why are there only a small number of businesses in the oligopoly industry, such as 2-3 car makers in the U.S. or three large cereal makers that control 80-90% of the market share?
Create and present a hypothesis of why you believe the Milky Way looks the way it...
Create and present a hypothesis of why you believe the Milky Way looks the way it does. Formulate a method to test this to create a theory. Whose theory (if any) supports this concept and description?  Formulate and present your own theory of why you believe the galaxy looks the way it does. Be sure to provide support for your theory.
Q2 - what strategy do you believe is best in this industry? and why? Q3 -...
Q2 - what strategy do you believe is best in this industry? and why? Q3 - Recommendations for Seagate Q4 - Recommendations for Quantum
Pick a market that you believe exhibits the characteristics of an oligopoly. Based on what you...
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?
Please list both a monopolistically competitive industry and an oligopoly (use examples that are not listed...
Please list both a monopolistically competitive industry and an oligopoly (use examples that are not listed in the textbook). Explain how they meet the characteristics of these market structures.
Please describe the reason(s) why we choose the counting sort algorithm to sort each digit in...
Please describe the reason(s) why we choose the counting sort algorithm to sort each digit in the Radix Sort?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT