Your SlideShare is downloading. ×
0
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Oligopoly Essentials
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Oligopoly Essentials

18,584

Published on

A2 microeconomics - basics of oligopoly

A2 microeconomics - basics of oligopoly

Published in: Technology, Education
0 Comments
6 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
18,584
On Slideshare
0
From Embeds
0
Number of Embeds
45
Actions
Shares
0
Downloads
0
Comments
0
Likes
6
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. A2 MicroOligopoly (Essentials)Tutor2u, Summer 2013
  • 2. What is an Oligopoly?High concentration ratio > 60% for top 5firms, branded productsEntry barriers – long run supernormal profitsInter-dependent decisions / uncertaintyThis is the keypoint aboutoligopoly!
  • 3. What is an Oligopoly?High concentration ratio > 60% for top 5firms, branded productsEntry barriers – long run supernormal profitsInter-dependent decisions / uncertaintyThis is the keypoint aboutoligopoly!
  • 4. What is an Oligopoly?High concentration ratio > 60% for top 5firms, branded productsEntry barriers – long run supernormal profitsInter-dependent decisions / uncertaintyThis is the keypoint aboutoligopoly!
  • 5. Strategic Interdependence• One firm’s output and price decisions areinfluenced by its competitors• Because there are few sellers, each oligopolistis likely to be aware of the actions of theothers. Decisions of one firm influence, andare influenced by, the decisions of other firms• This causes oligopolistic industries to be a highrisk for collusion
  • 6. Business BehaviourPriceWarsPriceMatchingNon-PriceCompetitionCartelsCo-operation
  • 7. Oligopoly EssentialsOLIGOPOLYPricemakers“Few”number ofdominantsellersLong runsupernormalprofitsStrategicinterdependence
  • 8. Oligopoly (O), duopoly (D) or a highlycompetitive (C) market – you decide!Household detergentsuppliers in the UKUK High Street BanksPlumbers & decorators inManchesterDOC
  • 9. Oligopoly (O), duopoly (D) or a highlycompetitive (C) market – you decide!Producers of liquefied gas(worldwide)Aircraft manufacturingRetail pharmacies / chemistsParcel deliveries in LondonODOC
  • 10. Pharmacies in BristolPharmacies incentralBirmingham
  • 11. Crucial aspects of oligopolyKeyEvaluation1. Oligopoly is best defined bythe actual behaviour ofbusinesses2. High market concentrationdoes not necessarily meanan absence of competition3. Non-price competition isgiven strong emphasisThere are severaloligopoly models atA2 – a highlycommon area forexaminers to test!
  • 12. Cost & PriceOutput (Q)The Kinked Demand Curve ModelMR ARMCP1Q1Importance of Non-PriceCompetition in Oligopoly1. Price stickinessobserved in oligopoly2. Price may remain closeto P1
  • 13. Cost & PriceOutput (Q)The Kinked Demand Curve ModelMR ARMCP1Q1Kinked Demand Curve1. An oligopolist faces a downwardsloping demand curve but theelasticity may depend on thereaction of rivals to changes in priceand output2. (a) rivals will not follow a priceincrease by one firm, so the actingfirm will lose market share -therefore demand will be relativelyelastic and a rise in price3. (b) rivals are more likely to match aprice fall by one firm to avoid a lossof market share. If this happensdemand will be more inelastic and afall in price will also lead to a fall intotal revenueMC2
  • 14. Cost & PriceOutput (Q)The Kinked Demand Curve ModelMR ARMCP1Q1Importance of Non-PriceCompetition in Oligopoly1. Price stickinessobserved in oligopoly2. Price may remain closeto P13. Even if MC increasesMC2
  • 15. Non-Price Competition is key to market share and profitabilityInnovation Quality of service Free UpgradesExclusivity
  • 16. Non-Price Competition is key to market share and profitabilityInnovation Quality of service Free UpgradesExclusivity
  • 17. Non-Price Competition is key to market share and profitabilityInnovation Quality of service Free UpgradesExclusivity
  • 18. Non-Price Competition is key to market share and profitabilityInnovation Quality of service Free UpgradesExclusivity
  • 19. Get help from fellowstudents, teachers andtutor2u on Twitter:@tutor2u_econ

×