2. DEFINITION OF OLIGOPOLY
• A situation in which a particular market is controlled by a small group of
firms.
• An oligopoly is much like a monopoly, in which only one company
exerts control over most of a market. In an oligopoly, there are at least
two firms controlling the market.
• The number of producers in oligopoly are lesser than that of perfect
competition and monopolistic competition.
• The few firms in oligopoly enjoy a high degree of market power.
3. CHARACTERISTICS OF OLIGOPOLY
• Profit maximization conditions
• Ability to set price
• Entry and exit
• Number of firms
• Product differentiation
• Perfect knowledge
• Interdependence
• Non-Price Competition
4. INDIAN AVIATION INDUSTRY
• The aviation industry in India used to be exclusively managed by Air
India and Indian Airlines and the flying rates used to be high.
• With the entry of new private airlines like Jet, Kingfisher and Indigo into
the aviation industry more competition was infused into the airline
industry.
• The present aviation industry in India, especially with regard to
passenger airlines, follows a strictly oligopoly structure.
5. PRICE WAR
• Indian Airlines announced 3-15% cut in fares in June 2002, next day Jet
Airways reduced prices by Rs.635 for economy class.
• In 2013 Indigo followed 1-rupee base fares for metro-to-metro Diwali
bookings when SpiceJet announced the same.
• In 2014, Air Asia a budget/low-cost carrier, entered Indian Market and
offered flight seats for a very low price as compared to its competitors, it
was able to pre-book a whopping 28,000 seats in just 48 hours. The other
airline carriers delayed too late to counter the price war thrown by Air
Asia and lost business to some extent.
8. OLIGOPOLY IN SOFTDRINK INDUSTRY
Three firms control 89% of soft drink sales:
• 42.8% : Coca-Cola’s 25 brands and 139 varieties
• 31.1% : Pepsi’s 18 brands and 163 varieties
• 15% : Dr. Pepper Snapple Group’s 20 brands and 109 varieties
9. • Normally, both of the firms use low-price strategy at the same time to
maximize the market profits.
• A reduction in market price in an oligopolistic market structure is always
beneficial for the consumers as it provides them with a variety of cheaper
close substitutes.
10. OLIGOPOLY IN STEEL INDUSTRY
• Steel industry is a classic example of oligopolistic industry.
• Steel industry due to its status as a core industry directly related to the
infrastructural development of the country holds a unique position
where the decisions made by a few players can affect the entire economy.
• The major players in the Indian scenario are:
• SAIL (Steel Authority of India)
• TISCO (Tata Iron and Steel Co ltd)
• RINL (Rashtriya Ispat Nigam ltd)
11. • The top 3 are called integrated producers and the rest are called
secondary producers.
• Mild steel production constitutes 95% of total output and is controlled by
the top 3.
• Oligopolistic nature of the industry is also helped by the treatment given
to the steel industry by the government.
• The steel industry is going through a period of mergers and acquisitions
where the smaller producers are being taken in by the larger firms, thus
increasing the control over the industry.(Tata Corus takeover)
15. Few players in market
• Saudi Aramco
• Gazprom
• National Iranian oil co.
• Exxonmobil
• Petro china
PETROLEUM INDUSTRY
16. • MERITS:
MERITS & DEMERITS
• Few competitors
• High profit margin
• Significant barriers of entry
• DEMERTS:
• High initial investment
• Limited recourses
• Huge operating cost
• they try to act as a monopolist and try to raise the price and restrict the
quantity
• Strict government control
