Gourt > Society > Issues > Economic > Monopolies and Oligopolies (5)
An oligopoly is a market form in which a market is dominated by a small number of sellers (oligopolists). The word is derived from the Greek for few sellers. Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. Oligopolistic markets are characterised by interactivity. The decisions of one firm influence, and are influenced by, the decisions of other firms. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants. An oligopoly is a form of economy. As a quantitative description of oligopoly, the four-firm concentration ratio is often utilized. This measure expresses the market share of the four largest firms in an industry as a percentage. Using this measure, an oligopoly is defined as a market in which the four-firm concentration ratio is above 40%. An example would be the supermarket industry in the United Kingdom, with a four-firm concentration ratio of over 70% and the brewery industry also in the UK has a four firm concentration ratio of a staggering 85%. In The U.S. oligopolies include the industries that produce cigarettes, beer, aircraft, motor vehicles, men's slacks, as well as the music recording industry. In an oligopoly, firms operate under imperfect competition, the demand curve is kinked to reflect inelasticity below market price and elasticity above market price, the product or service firms offer are differentiated and barriers to entry are strong. Following from the fierce price competitiveness created by this sticky-upward demand curve, firms utilize non-price competition in order to accrue greater revenue and market share.
Oligopsony is a market form in which the number of buyers are small while the number of sellers in theory could be large. This typically happens in market for inputs where a small number of firms are competing to obtain factors of production. This also involves strategic interactions but of a different nature than when competing in the output market to sell a final output. Oligopoly refers to the market for output while oligopsony refers to the market where these firms are the buyers and not sellers (eg. a factor market). A market with a few sellers (oligopoly) and a few buyers (oligopsony) is referred to as a bilateral oligopoly.
The terms monopoly (one seller), monopsony (one buyer), and bilateral monopoly have a similar relationship.
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Economic presentation went well. Now: Discussing game theory, oligopolies, monopolies and how to shape public policy. Next: Research.
pauld2 (Paul Dietzel) Mon, 23 Nov 2009 17:24:21 -0000
Economic presentation went well. Now: Discussing game theory, oligopolies, monopolies and how to shape public policy. Next: Research.
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