Oligopoly lesson 6a

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  • i have presentation to do and i need to find the definition of oligopoly and its characteristics..
    thanks..
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  • good presentation but centralized cartel and market sharing cartel is missing in briefing.
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Oligopoly lesson 6a

  1. 1. OLIGOPOLY [email_address]
  2. 2. OLIGOPOLY CHARACTERISTICS <ul><li>The oligopoly form of market is characterized by: - A few large dominant firms, with many small ones, a product either standardized or differentiated, - Power of dominant firms over price, but fear of retaliation, - Technological or economic barriers to become a dominant firm, -Extensive use of nonprice competition because of the fear of price wars. </li></ul>
  3. 3. OLIGOPOLY CONCENTRATION <ul><li>An oligopoly form of market is characterized by the presence of a few dominant firms. There may be a large number of small firms, but only the major firm have the power to retaliate. This results in a high concentration of the industry in only 2 to 10 firms with large market shares. </li></ul>
  4. 4. OLIGOPOLY CONCENTRATION CAUSES <ul><li>The most notable causes for the high concentration in oligopoly type of markets are: </li></ul><ul><li>- economies of scale present in production of certain goods, - business cycles eliminating weak competitors, - benefits from firms merging, and - other barriers such as technological development and advertising. </li></ul>
  5. 5. Oligopoly <ul><li>Key features of oligopoly </li></ul><ul><ul><li>barriers to entry </li></ul></ul><ul><ul><li>interdependence of firms </li></ul></ul><ul><li>Competition versus collusion </li></ul><ul><li>Collusive oligopoly: cartels </li></ul><ul><ul><li>equilibrium of the industry </li></ul></ul>
  6. 6. Oligopoly <ul><li>Key features of oligopoly </li></ul><ul><ul><li>barriers to entry </li></ul></ul><ul><ul><li>interdependence of firms </li></ul></ul><ul><li>Competition versus collusion </li></ul><ul><li>Collusive oligopoly: cartels </li></ul><ul><ul><li>equilibrium of the industry </li></ul></ul><ul><ul><li>allocating and enforcing quotas </li></ul></ul>
  7. 7. Oligopoly <ul><li>Tacit collusion </li></ul><ul><ul><li>price leadership: dominant firm </li></ul></ul>
  8. 8. Oligopoly <ul><li>Tacit collusion </li></ul><ul><ul><li>price leadership: dominant firm </li></ul></ul><ul><ul><li>price leadership: barometric </li></ul></ul>
  9. 9. Oligopoly <ul><li>Tacit collusion </li></ul><ul><ul><li>price leadership: dominant firm </li></ul></ul><ul><ul><li>price leadership: barometric </li></ul></ul><ul><ul><li>rules of thumb </li></ul></ul>
  10. 10. Oligopoly <ul><li>Factors favouring collusion </li></ul><ul><ul><li>Few firms </li></ul></ul><ul><ul><li>Open with each other </li></ul></ul><ul><ul><li>Similar production methods and average costs </li></ul></ul><ul><ul><li>Similar products </li></ul></ul><ul><ul><li>Dominant firm </li></ul></ul><ul><ul><li>Significant entry barriers </li></ul></ul><ul><ul><li>Stable market </li></ul></ul><ul><ul><li>No government measures to curb collusion </li></ul></ul>
  11. 11. Kinked demand for a firm under oligopoly £ Q O P 1 Q 1 D D
  12. 12. Oligopoly <ul><li>Non-collusive oligopoly: the kinked demand curve theory </li></ul><ul><ul><li>assumptions of the model </li></ul></ul><ul><ul><li>stable prices </li></ul></ul>
  13. 13. Stable price under conditions of a kinked demand curve £ Q O P 1 Q 1 D  AR MC 2 MC 1 MR a b
  14. 14. Oligopoly <ul><li>Non-collusive oligopoly: the kinked demand curve theory </li></ul><ul><ul><li>assumptions of the model </li></ul></ul><ul><ul><li>stable prices </li></ul></ul><ul><ul><li>limitations of the model </li></ul></ul><ul><li>Oligopoly and the public interest </li></ul>
  15. 15. Oligopoly <ul><li>Non-collusive oligopoly: the kinked demand curve theory </li></ul><ul><ul><li>assumptions of the model </li></ul></ul><ul><ul><li>stable prices </li></ul></ul><ul><ul><li>limitations of the model </li></ul></ul><ul><li>Oligopoly and the public interest </li></ul><ul><ul><li>advantages </li></ul></ul>
  16. 16. Oligopoly <ul><li>Non-collusive oligopoly: the kinked demand curve theory </li></ul><ul><ul><li>assumptions of the model </li></ul></ul><ul><ul><li>stable prices </li></ul></ul><ul><ul><li>limitations of the model </li></ul></ul><ul><li>Oligopoly and the public interest </li></ul><ul><ul><li>advantages </li></ul></ul><ul><ul><li>disadvantages </li></ul></ul>
  17. 17. Oligopoly <ul><li>Non-collusive oligopoly: the kinked demand curve theory </li></ul><ul><ul><li>assumptions of the model </li></ul></ul><ul><ul><li>stable prices </li></ul></ul><ul><ul><li>limitations of the model </li></ul></ul><ul><li>Oligopoly and the public interest </li></ul><ul><ul><li>advantages </li></ul></ul><ul><ul><li>disadvantages </li></ul></ul><ul><ul><li>difficulties in drawing general conclusions </li></ul></ul>

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