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    Features of Oligopoly

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    yashvimehta93
    This document defines oligopoly and discusses its key features. It begins by defining oligopoly as a market structure with a small number of sellers aware of each other's actions. It then lists five common sources of oligopoly: huge capital requirements, economies of scale, patent rights, control of raw materials, and mergers. The document proceeds to describe features of oligopoly markets, including their small number of interdependent firms, barriers to entry, and indeterminate prices and output. It provides examples of oligopoly industries and references for further information.

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    Features of Oligopoly

    Uploaded by

    yashvimehta93
    549 views18 pages
    This document defines oligopoly and discusses its key features. It begins by defining oligopoly as a market structure with a small number of sellers aware of each other's actions. It then lists five common sources of oligopoly: huge capital requirements, economies of scale, patent rights, control of raw materials, and mergers. The document proceeds to describe features of oligopoly markets, including their small number of interdependent firms, barriers to entry, and indeterminate prices and output. It provides examples of oligopoly industries and references for further information.

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    oligopoly market & its features

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    This document defines oligopoly and discusses its key features. It begins by defining oligopoly as a market structure with a small number of sellers aware of each other's actions. It then lists five common sources of oligopoly: huge capital requirements, economies of scale, patent rights, control of raw materials, and mergers. The document proceeds to describe features of oligopoly markets, including their small number of interdependent firms, barriers to entry, and indeterminate prices and output. It provides examples of oligopoly industries and references for further information.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    549 views18 pages

    Features of Oligopoly

    Uploaded by

    yashvimehta93
    This document defines oligopoly and discusses its key features. It begins by defining oligopoly as a market structure with a small number of sellers aware of each other's actions. It then lists five common sources of oligopoly: huge capital requirements, economies of scale, patent rights, control of raw materials, and mergers. The document proceeds to describe features of oligopoly markets, including their small number of interdependent firms, barriers to entry, and indeterminate prices and output. It provides examples of oligopoly industries and references for further information.

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    © All Rights Reserved
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    of 18

    Price and Output Decision under Oligopoly

    MEANINGOFOLIGOPOLY:
    Anoligopolyis amarket formin which amarket
    orindustryisdominatedbyasmallnumberofsellers.
    Withfewsellers,eacholigopolistsislikelytobeaware
    oftheactionsoftheothers.Accordingtogametheory,
    the decisions of one firm therefore influence and are
    influencedbythedecisionsofotherfirms.

    DEFINITION OF OLIGOPOLY:
    Oligopolyisdefinedasamarketstructureinwhichthereareafew
    sellerssellinghomogeneousordifferentiatedproducts.
    Asituationinwhichaparticularmarketiscontrolledbyasmallgroup
    offirms.

    Inwhichonlyonecompanyexertscontrolovermostofamarket.In

    anoligopoly,thereareatleasttwofirmscontrollingthemarket.
    Inthistherearetwopartsi.e..
    HomogeneousOligopoly
    HeterogeneousOligopoly

    SOURCES OF OLIGOPOLY

    1.
    2.
    3.
    4.
    5.

    Huge Capital Investment


    Economies of scale
    Patent rights
    Control over certain raw material
    Merger and Takeover

    1. Huge Capital Investment


    Some industries are by nature capital-intensive, e.g.,
    manufacturing automobiles, aircraft, ships, TV sets,
    computers,mobilephones,refrigerators,steelandaluminum
    goods,etc.suchindustriesrequirehugeinitialinvestment.

    2. Economies of Scale:
    By virtue of huge investment and large scale production, the large
    units enjoy absolute cost advantage due to economies of scale in
    production, purchase of industrial inputs, market financing, and scale
    organization.

    3. Patent rights:
    In case of differentiated oligopoly, firms get their differentiated
    product patented which gives them an exclusive right to produce and
    marketthepatentedcommodity.Thispreventsotherfirmsfromproducing
    thepatentedcommodity.

    4. Control over certain raw materials:


    whereafewfirmsacquirecontroloveralmosttheentiresupplyof
    importantinputsrequiredtoproducingacertaincommodity,newfirms
    finditextremelydifficulttoentertheindustry.

    5. Merger and takeover:


    Mergerofrivalfirmsortakeoverofrivalfirmsbythebiggeroneswith
    view to protecting their joint market share or to put an end to waste of
    competitionisworkinginmoderntimes,asanimportantfactorthatgives
    rise to oligopolies and strengthens the oligopolistic tendency in modern
    industries.

    FEATURES OF OLIGOPOLY

    Small number of sellers.


    There is a small number of sellers
    under oligopoly.
    How small is the number of sellers in
    oligopoly markets is difficult to specify
    precisely for it depends largely on the size
    of the market.

    Industry

    no. of firms

    Total market share(%)

    Ice-cream

    100.00

    bread

    100.00

    Milk food

    99.95

    Motor-cycles

    99.95

    Passenger cars

    94.34

    cigarettes

    99.90

    Fruit juice

    10

    98.21

    Automobile tyres

    91.37

    Interdependence of decision making.

    It is most striking feature of an oligopolistic


    market structure.
    Due to few firms under oligopoly brings
    the firms in keen competition with each other.
    The competition between the firms takes the
    form of action, reaction and counter-action in
    the absence of collusion between the firms.

    Barriers to entry.
    Barriers to entry to an oligopolistic industry
    arise due to market condition such as:
    Huge investment to match the production capacity of
    existing firms.
    Economies of scale and absolute cost advantage
    enjoyed by the existing firms.
    Strong consumer loyalty.
    Preventing the entry of new firms.

    Indeterminate price and output.


    Another important feature of the
    oligopolistic market structure is the
    indeterminateness of price and output.
    The characteristic fewness and
    interdependence of oligopoly firms makes
    derivation of the demand curve a difficult
    proposition.

    Continued
    Therefore price and output are said to be
    indeterminate under collusive oligopoly.
    But, there too, collusion may last or it may
    break down.
    If price is once determined, it tends to
    stabilize.

    REFERENCES
    Managerial economics 7th edition
    D N Dwivedi published 2008
    CMIE, industries and market share.
    august 2000.
    http://www.yourarticlelibrary.com/oligopolymarket/the-oligopoly-market-example-types-andfeatures-micro-economics/9140/

    THANK YOU

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