Reducing the power of an oligpoly essay

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Reducing the power of an oligpoly essay

Two extreme market forms are monopoly characterised by the existence of a single seller and perfect competition characterised by a large number of sellers.

Competition is of two types- perfect competition and monopolistic competition. In monopoly there is no rival. So the monopolist is not concerned with the effect of his actions on rivals.

In both types of competition, the number of firms is so large that the actions of any one seller have little, if any, effect on its competitors. An industry with only a few sellers is known as an oligopoly, a firm in such an industry is known as an oligopolist.

Although car-wash is a million rupee business, it is not exactly a product familiar to most consumers. An oligopoly is not necessarily made up of large firms.

Essentially, oligopoly is the result of the same factors that sometimes produce monopoly, but in somewhat weaker form. When these economies of scale are very strong, they lead to monopoly, but when they are not that strong they lead to competition among a small number of firms.

Each firm must, therefore, recognise that changes in its own policies are likely to elicit changes in the policies of its competitors as well. And so there is opportunity for both conflict and cooperation.

Oligopoly refers to a market situation in which the number of sellers is few, but greater than one. A special case of oligopoly is monopoly in which there are only two sellers.

The notable characteristics of oligopoly are: An oligopolist is neither a price-taker like a competitor nor a price-maker like a monopolist. It is a price-searcher.


An oligopolist is neither a big enough part of the market to be able to act as a monopolist, nor a small enough part of the market to be able to act as a competitor. But each firm is a dominant part of the market.

Reducing the power of an oligpoly essay

In such a situation, competition among buyers will force all the sellers to charge a uniform price for a product. But each firm is sufficiently so large a part of the market that its actions will have noticeable effects upon his rivals.

Monopoly vs Oligopoly

This means that if a single firm changes its output, the prices charged by all the firms will be raised or lowered. In oligopoly no firm can take decision on price independently. It is because the decision to fix a new price or change an existing price will create reactions among the rival firms.

If a firm reduces its price its rivals may reduce their prices or they may not. So there is lack of symmetry in the behaviour of rival firms. This type of reaction of rivals is not found in perfect competition or monopolistic competition where all firms change their price in the same direction and by the same magnitude in order to remain competitive and survive in the long run.

For this reason it is difficult to predict the total demand for the product of an oligopolistic industry. It is true that the consequences of attempted price variations on the part of an individual seller are uncertain.

His rivals may follow his change, or they may not, but they will, in all likelihood, notice it. The results of any action on the part of an oligopolist or even a duopolist depend upon the reactions of his rivals.

In short, it is not possible to define general price- quantity relations for an individual firm, since reaction patterns of rivals are highly uncertain and almost completely unknown. Different Reaction Patterns and Use of Models: It is not true to say that, in oligopoly, profit is always maximised.

It is because an oligopolist does not have control over all the variables which affect his profit. Moreover, a variety of possible reaction patterns is possible in this market—there is a conjectural variation in this market.

This is why various models are used to describe the diverse behaviour of oligopoly markets where a variety of outcomes is possible. As in monopolistic competition there is not only price competition but non-price competition as well in oligopoly and, to some extent, in duopoly.

Reducing the power of an oligpoly essay

For example, advertising is often a life and death question in this type of market due to strategic behaviour of all firms.

In most oligopoly situations we find intermediate outcomes.Monopolistic and Oligopoly Market Structures Monopoly is a type of market structure in which there is only one seller controlling the whole industry of a certain offspring that does not have a close substitute. We will write a custom essay sample on The Power of Language specifically for you for only $ $/page.

Order now Newspeak’s main goal is to restrict vocabulary to the point where thoughtcrime is impossible. Syme, one of the newspeak engineers says “ We’re cutting the language down to the bone. Market power allows firms to increase economic profit through strategic tactics such as erecting barriers to entry, reducing rivalry, limiting substitutes, and reducing the power of buyers and suppliers (Brickley, Smith, & Zimmerman, ).

Oligopoly is a market structure in which a small number of sellers are opposed to a lot of buyers, ie the situation when the market several vendors and each may affect the rates. The emergence of new vendors is difficult or even impossible e.

Definition of oligopoly. Main features. Diagrams and different models of how firms can compete - kinked demand curve, price wars, collusion. Use of game theory and interdependence. Read this essay on Position Power and Personal Power.

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