Question

Name a product that you regularly purchase from a firm that operates in an oligopolistic industry. Explain why the product and firm fit the model of oligopoly. Think about the TV commercials and/or print advertisements that you’ve seen from this industry: What interdependence have you noticed between the firm you selected and its rivals in terms of product differentiation, price leadership, or price competition? Explain your answer. 200 WORDS

Answer 1

• Oligopoly occurs when all or most of the revenues of an market are owned by a limited number of big corporations.

Examples: Car industry, network provider, cable television and commercial air travel etc.

• It's oligopoly because

a. an market dominated by a small number of large companies,

b. companies offer similar or distinct goods and

c. there are major barriers to entry for the market.

• TV commercial and further justification

The industry has high entry barriers as both the automobile industry needed massive investment and high techinque to do the job in a systematic and logical manner.

We have shown in print ads where they compete with each other on the basis of color or seem rational and successful decisions are taken by an oligopoly industry in the case of the automotive industry. In an auto mobile industry, all companies are interdependent on each other and can not operate independently from each other. A business competing on the market with just a few rivals must take into consideration the customer's future reaction in the best possible way, as well as a rational decision. They will set the price together so as to logically gain the full benefit from the company scanerio.

Another good example can be the Indian market's mobile sim card. A sim card is introduced in India last year, called Jio. It had provided free unlimited calls, for 6 months Internet access on 4g. Subsequently, a package of Rs. 303 had begun to get unrestricted sms, calls, regular use of 1 GB of internet on 4g up to three months. Earlier, other companies such as Airtel, Vodaphone, BSNL, Aircel, etc. used to say only for one month on an average of 1 GB of internet usage data.

Now when Jio implements plans like these and draws consumers who abandon or limit the usage of the other companies, the other companies behave when naive. They opt for model price leadership. Many companies expect that in the next time Jio will keep its plan intact and they provide the same plan with the legal price at which they will make provision. This is a non-collusive oligopolistic form, since they do not discuss directly to have a mutual form. Regularly huge quantities of Jio sim are being sold and because of this the company of others gets hindered.

Please don't forget to like the solution if it is helpful. Thank you.