ETHICS IN OLIGOPOLY
AND
PUBLIC POLICIES

PRESENTED BYNEHA
PREETIKA
VARSHA PANDEY
OLIGOPOLY
•

Characteristics of an Oligopoly Market– Few sellers offering similar or identical products
– Interdependent f...
MARKETS WITH ONLY A FEW SELLERS
• Duopoly
– Oligopoly with only two firms.
– Decide quantity to sell
– It is the simplest ...
PUBLIC POLICY TOWARD
OLIGOPOLIES
• Cooperation among oligopolists is undesirable
from the standpoint of society as a whole...
Restraint of Trade and the Antitrust Laws
• Antitrust laws make it illegal to restrain trade
or attempt to monopolize a ma...
Antitrust: Sherman Antitrust Act
• Section 1:
Every contract, combination in the form of
trust or otherwise, or conspiracy...
• Section 2:
Every person who shall monopolize, or
conspire with any other person or persons
to monopolize any part of the...
Controversies over Antitrust Policy
• Antitrust policies sometimes may not allow
business practices that have potentially
...
Controversies over Antitrust Policy
• Resale Price Maintenance (or fair trade)
– occurs when suppliers (like wholesalers) ...
• What should society do in the face of the high
degree of market concentration in oligopolistic
industries? There are thr...
• First, the Do Nothing view, claims that the power of
oligopolies is not as large as it appears.
• Though competition wit...
• Second, the Antitrust view argues that prices
and profits in highly concentrated industries
are higher than they should ...
• The third view is the Regulation view, which can be seen as a middle
ground between the other two. Those who advocate re...
• Therefore, they suggest setting up regulatory
agencies and legislation to control the
activities of large corporations. ...
Conclusion
• Whichever view we take, clearly the social benefits
of free markets cannot be guaranteed, and the
markets the...
Example-Destroyer/Predatory
Pricing
•

•
Microsoft – have been accused of
predatory pricing strategies in offering
‘free’ ...
Microsoft Antitrust WMV.3gp
Ethics in Oligopoly & public policy
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Ethics in Oligopoly & public policy

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Ethics in Oligopoly & public policy

  1. 1. ETHICS IN OLIGOPOLY AND PUBLIC POLICIES PRESENTED BYNEHA PREETIKA VARSHA PANDEY
  2. 2. OLIGOPOLY • Characteristics of an Oligopoly Market– Few sellers offering similar or identical products – Interdependent firms – Best off cooperating and acting like a monopolist by producing a small quantity of output and charging a price above marginal cost. – Strategic interactions between firms. • • Ex: Mobile networks like airtel, Vodafone, Docomo etc. Ex: Cement companies like: Jaypee, ultra tech cement, ambuja cement etc are the identical product manufactured by producers. All the producers come together to take a decision about price of the product, and about the subsidiaries from govt.
  3. 3. MARKETS WITH ONLY A FEW SELLERS • Duopoly – Oligopoly with only two firms. – Decide quantity to sell – It is the simplest type of oligopoly. – Price determined on the market.
  4. 4. PUBLIC POLICY TOWARD OLIGOPOLIES • Cooperation among oligopolists is undesirable from the standpoint of society as a whole because it leads to – production that is too low and – prices that are too high.
  5. 5. Restraint of Trade and the Antitrust Laws • Antitrust laws make it illegal to restrain trade or attempt to monopolize a market. Sherman Antitrust Act of 1890 Elevated agreements among oligopolists from an unenforceable contract to a criminal conspiracy. Clayton Act of 1914 Further strengthened the antitrust laws. PROS: Used to prevent mergers Used to prevent oligopolists from colluding.
  6. 6. Antitrust: Sherman Antitrust Act • Section 1: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or with foreign nations, is hereby declared illegal.
  7. 7. • Section 2: Every person who shall monopolize, or conspire with any other person or persons to monopolize any part of the trade or commerce among the several states, or with foreign nations, shall be guilty of a misdemeanor.
  8. 8. Controversies over Antitrust Policy • Antitrust policies sometimes may not allow business practices that have potentially positive effects: – Resale price maintenance – Predatory pricing – Tying
  9. 9. Controversies over Antitrust Policy • Resale Price Maintenance (or fair trade) – occurs when suppliers (like wholesalers) require retailers to charge a specific amount ,Might seem anticompetitive. • Predatory Pricing – occurs when a large firm begins to cut the price of its product(s) with the intent of driving its competitor(s) out of the market • Tying – when a firm offers two (or more) of its products together at a single price, rather than separately, Form of price discrimination.
  10. 10. • What should society do in the face of the high degree of market concentration in oligopolistic industries? There are three main points of view. • MAIN VIEWS OF OLIGOPOLY POWER: There are three main points of viewDo-Nothing View Anti trust View Regulation View
  11. 11. • First, the Do Nothing view, claims that the power of oligopolies is not as large as it appears. • Though competition within industries has declined, they maintain that competition between industries with substitutable products has replaced it. • Finally, they argue that bigger is better, especially in the current age of global competition. Economies of scale, produced by high concentration, actually lower prices for consumers.
  12. 12. • Second, the Antitrust view argues that prices and profits in highly concentrated industries are higher than they should be. • By breaking up large corporation into smaller units, they claim, higher levels of competition will emerge in those industries. • The result will be a decrease in collusion, greater innovation, and lower prices.
  13. 13. • The third view is the Regulation view, which can be seen as a middle ground between the other two. Those who advocate regulation do not wish to lose the economies of scale offered by large corporations, but they also wish to ensure that consumers are not harmed by large firms. • They argue that subdivision of Big industries is not favourable. They as a giant company may produce other good benefits for the masses. • But they also encourage regulated market and even suggest nationalization in case of non-compliance of market regulations. • But they also suggest the ill effects of nationalization at the same time.
  14. 14. • Therefore, they suggest setting up regulatory agencies and legislation to control the activities of large corporations. Some even suggest that the government should take over the operation of firms where only public ownership can guarantee that they operate in the public interest.
  15. 15. Conclusion • Whichever view we take, clearly the social benefits of free markets cannot be guaranteed, and the markets themselves cannot be morally justified, unless firms remain competitive.
  16. 16. Example-Destroyer/Predatory Pricing • • Microsoft – have been accused of predatory pricing strategies in offering ‘free’ software as part of their operating system – Internet Explorer and Windows Media Player - forcing competitors like Netscape and Real Player out of the market Deliberate price cutting or offer of ‘free gifts/products’ to force rivals (normally smaller and weaker) out of business or prevent new entrants Anti-competitive and illegal if it can be proved • Typical of oligopoly with collusion
  17. 17. Microsoft Antitrust WMV.3gp

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