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Oligopolists

Oligopolists

There are four market structures in our economy today : Perfect

competition, monopolistic competition, oligopolies and monopolies. This essay

shall describe the oligopoly market.

The definition of an oligopoly states that in an industry, a small

number of firms dominate the market. There are a low number of firms in the

industry, becasue and adding to the barriers to entry. The barriers of entry to

an oligopolistc market include the financial resources needed to enter and such

regulations from the government or patents.

In this market, there is a high degree of differentiated products, and

so with all of the above factors combined in this market, the competition is of

sales, not of price. There is also a factor of concern from the firms in an

oligopolistic market - where the actions of one firm will subsequently effect

the other firms in the industry. This results in each oligopolist watching its

competitors closely, and is a method of competition between the firms, other

than by price wars.

The Kinked Demand Curve, is the economical graph that shows why

oligopolists tend to adopt a common price -to achieve the greatest price and

output.

The Hilmer committe, estabilished 1993, is a government body who acts in

the interests of recommendations of National Competition policies.

In 1995, the Trade Practises Act (T.P.A.) was introduced. The T.P.A.

sets out the general responsibilities of sellers, such as the firms of

oligopolies, and out laws actions that may be unfair to the consumers. This

includes misleading advertising, market sharing and collusion.

Collusion is where the firms of an industry meet a set, common price, or agree

not to come into each other in the market area. These two above practises are

ways of government intervention that regulate the conduct of oligopolies.

Australian examples of oligopolies include, Hoyts, Kelloggs, Bridgestone,

Dunlop, Carlton United, Dulux and Coca Cola.

In conclusion, Oligopolists tend to adopt a similar price, for similar

products, If price is to be raised, the firms find it best to do so together.

Oligopolists avoid price wars. Sales competition, not price competition is

their area.

Source: Essay UK - http://www.essay.uk.com/coursework/oligopolists.php



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