Question

Explain the competitive effects in oligopolistic markets and how firms may behave differently than in more fragmented markets?

Answer 1

What is oligopoly and how it is different from more fragmented market?

Oligopoly is a form of market where the sellers are few, their entry is not easily acceptable and they have a hold over their customers on the other hand more fragmented market would obviously have more sellers and they do not hold one handed influence over the buyers.

The situation in which one has a more control over the buyers(i.e. oligopoly), in that case supply of the commodity has more influence over the price control and in the fragmented market the price of a commodity is more of demand oriented.

The oligopolistic market in more of independent type which does not get very much affected from externalities whereas the fragmented market is much of customer centric. So it is more of externalities forces influenced.

The perfect example of oligopoly is petrolium industry where prices are decided by it's supply and demand factor is secondary. The agricultural sector can be started as an example of fragmented market where it's pricing is done on the basis of demand and supply is secondarily accepted.