Nilanjan Banik on LinkedIn: The Evolution Of India’s Market Structure: Oligopoly On The Horizon

Combined, these companies exert significant influence over a market or sector. Parker Brothers first marketed a property-trading board game called Monopoly in 1935. In a series of court cases in the 1970s, they attempted to prevent Ralph Anspach, an economics professor, from selling a game called Anti-Monopoly. Anspach claimed that Parker Brothers did not have exclusive rights to sell Monopoly, since the company had not originally invented it. The website finewaters.com compares brands of mineral water on a range of properties including mineral composition, acidity, carbonation, hardness, and vintage.

The organization was founded in Baghdad in 1960 with five countries but expanded to 13 oil-producing countries in 1975. Game theorists have developed models for these scenarios, which form a sort of prisoner’s dilemma. When costs and benefits are balanced so that no firm wants to break from the group, it is considered the Nash equilibrium state for oligopolies.

Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly. Some of the most notable oligopolies in the U.S. are in film and television production, recorded music, wireless carriers, and airlines. Since the 1980s, it has become more common for industries to be dominated by two or three firms. Merger agreements between major players have resulted in industry consolidation. An oligopoly is when a few companies exert significant control over a given market. Together, these companies may control prices by colluding with each other, ultimately providing uncompetitive prices in the market.

What are the characteristics of perfect competition?

1. Figure 7.22 Estimates of profit margin, markup, and demand elasticities(prices in 1983 USD).
2. Cournot’s work influenced other nineteenth-century economists, such as Marshall and Walras, and established the basic principles we still use to understand the behaviour of firms.
3. A key characteristic of an oligopoly is that no one firm can keep the others from having significant influence over the market.
4. Group Behaviour means that firms tend to behave as if they were a single firm even though individually they retain their independence.

If a firm tries to reduce the price, the rivals will also react by reducing their prices. It will lead to loss of customers for the firm, which intended to raise the price. Oligopolies tend to arise in an industry that has a small number of influential players, none of which can effectively push out the others. These industries tend to be capital-intensive and have oligopoly examples in india several other barriers to entry such as regulation and intellectual property protections. The music entertainment industry, too, is dominated by only a handful of producers, many of whom also own some of the top movie production companies.

Current Examples of Oligopolies

We say that such a firm has market power—that is, sufficient bargaining power to set a high price without losing its customers to competitors. The term is used to describe the distinctions between industries, which are made up of different companies that sell their products and services. Most market structures aim for perfect competition, which is a theoretical construct that doesn’t actually exist.

For example, in monopolistic or differentiated product markets, consumers may have brand loyalty or preferences based on product differentiation. By studying market structures, businesses can gain valuable insights into consumer behavior trends and adjust their marketing strategies accordingly. Understanding the importance of market structure is crucial for businesses and consumers alike.

Oligopolies exist in several industries from mass media and entertainment to carmakers and airlines to segments of big tech. Industries where smaller companies have been bought out or merged, or where large corporations dominate, tend to have oligopolies. A monopoly is one firm holding concentrated market power, a duopoly consists of two firms, and an oligopoly is two or more firms. A consumer’s willingness to pay for a particular model depends on its own characteristics and price, but also on those of other models on sale. When many similar models are available, consumers will be more responsive to price differences. If the price of a VW Polo rose, demand would fall because some people would choose to buy one of several comparable small cars.

Worldwide there are only a few more major automakers including Toyota, Hyundai Motor Group, Honda, Volkswagen Group, and Renault-Nissan-Mitsubishi.

Among other detrimental effects of an oligopoly include limiting new entrants in the market and decreased innovation. Oligopolies have been found in the oil industry, railroad companies, wireless carriers, and big tech. The main problem that firms in an oligopoly face is that each firm has an incentive to cheat. Such competition can be waged through prices, or through simply the individual company expanding its own output brought to market. In highly concentrated markets dominated by a few large firms, there may be less competition and potential for anti-competitive behavior. In order to understand the different types of markets, it’s important to first grasp how markets function.

Oligopoly Characteristics

1. Only those with high brand loyalty, or a strong preference for a feature other models do not possess, will fail to respond.
2. Some of the most notable oligopolies in the U.S. are in film and television production, recorded music, wireless carriers, and airlines.
3. Therefore, it makes more sense to have a single firm that can take advantage of economies of scale and provide electricity at a lower cost to consumers.
4. Patents, requirement of large capital, control over crucial raw materials, etc, are some of the reasons, which prevent new firms from entering into industry.
5. A monopoly is a market with only one producer, a duopoly has two firms, and an oligopoly consists of two or more firms.
6. If the firms produce differentiated products, then it is called differentiated or imperfect oligopoly.

For example, instead of competing to attract customers by lowering prices or offering better contracts, they may all use similar contracts or keep prices around the same level. This anti-competitive behavior can lead to higher costs and less favorable terms for consumers. In India, the telecommunications industry is a prime example of an oligopoly.

Role of Buyers and Sellers

Only those with high brand loyalty, or a strong preference for a feature other models do not possess, will fail to respond. And if the price fell, demand would increase because consumers would be attracted away from other cars. Augustin Cournot (1801–1877) was a French economist, now most famous for his model of oligopoly (a market with a small number of firms).

Operating systems for smartphones and computers provide excellent examples of oligopolies in big tech. Apple iOS and Google Android dominate smartphone operating systems, while computer operating systems are overshadowed by Apple and Microsoft Windows. More often, though, they arise due to industry consolidation and protectionism, either due to government interference or other factors. The limited number of competitors creates an oligopoly, even if the companies aren’t deliberately colluding with each other. When companies within the same industry work together to increase their mutual profits instead of exclusively competing with one another, it is known as an oligopoly.