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Oligopoly Explained

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Oligopoly Explained

  1. 1. Harmeet Anand, Hiroki Osame, Hiroko Taniguchi, and Keita Kim  The Concept of an Oligopoly
  2. 2. THE NATURE OF OLIGOPOLY <ul><li>&quot; A market form where there are only a few firms in the industry but there are many buyers. &quot; </li></ul><ul><li>- Producers  </li></ul><ul><li>- Buyers  </li></ul><ul><li>- Products  </li></ul><ul><li>- Mutual Interdependence </li></ul><ul><li>- Price </li></ul><ul><li>- Competition </li></ul><ul><li>- Relationship between firms </li></ul><ul><li>- Economic Scale </li></ul>
  3. 3. GRAPHS
  4. 4. KINKED DEMAND CURVE <ul><ul><li>Increase price = elastic </li></ul></ul><ul><ul><li>Decrease price = inelastic </li></ul></ul>
  5. 5. MARGINAL REVENUE CURVE <ul><ul><li>Two different elasticities </li></ul></ul><ul><ul><li>Disappears </li></ul></ul>
  6. 6. MARGINAL COSTS CURVES <ul><ul><li>When vertical, change in marginal costs will not affect the price and quantity </li></ul></ul>
  7. 7. NORMAL PROFIT
  8. 8. ABNORMAL PROFIT
  9. 9. LOSS
  10. 10. COMMON EXAMPLES <ul><li>- Operating Systems : Apple, Microsoft </li></ul><ul><li>- Gaming Consoles : Nintendo, Sony, Microsoft </li></ul><ul><li>- Canada's wireless service : Rogers Wireless, Bell Mobility,  Telus </li></ul><ul><li>- UK's supermarkets : Tesco, Sainsbury's, Asda and Morrisons </li></ul><ul><li>- World wide food processing : Kraft Foods, PepsiCo and Nestle </li></ul><ul><li>- Airliners : Boeing and Airbus </li></ul><ul><li>- American TV : Disney/ABC, CBS Corporation, NBC Universal, Time Warner, and News Corporation </li></ul><ul><li>- UK's detergent market : Unilever and Procter & Gamble </li></ul>
  11. 11. COMPARISON Oligopoly Monopoly Perfect Competition Monopolistic Competition - Innovative/ creative - Few firms = greater efficiency - Expand too much - Experience diseconomy of scale - Increase in AC - No competition, no innovation - Undifferentiated products  - Consumers have limited choice - BORING - Advertise and induce consumers to spend more -No control in price - Consumers suffer more
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  13. 13. OLIGOPOLY <ul><li>A market form where there are only a few firms in the industry but there are many buyers. </li></ul><ul><li>  </li></ul><ul><li>The kinked demand curve very clearly depicts the nature of an oligopolistic market structure </li></ul>

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