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Microecons Oligopoly
Microecons Oligopoly
Oligopolistic industry market is the field of market that has only few firms that runs the
specific business. The firms dominate and share the market structure. Thus, it is highly
concentrated. However, some small firms may still operate but is might be difficult to
compete with the big firms in this oligopolistic market field. Concentration ratios used by the
economist to determine whether the market is oligopoly or not. Concentration ratios measure
the proportion of total market share held by a given number of firms operate in the business.
The key characteristics of firms that operate in close competition that build up the
oligopolistic market are the firms are interdependent, highly strategic business plan and high
barriers to enter the market. The firm in this market have to make decision based on the
potential reaction of other firms in this oligopolistic market. Therefore, they cannot act
independently of each other. Next, in order to survive in oligopolistic market, the firms in this
market should have a very good strategy in running the business. The firms need to plan and
lay out a range of possible options according to other firms might react in this market.
Besides that, oligopoly has barriers of entry in order to maintain their position of dominance
in the market. This is due to the high cost or difficult for potential rivals to enter the
oligopolistic market.
The article chosen is titled Malaysia Telecommunication Industry Outlook which is
about the oligopolistic market in telecommunication industry in Malaysia. The article shows
the revenue received from the telecommunication sector. This article also analyse each firms
that involved in the telecommunication industry that is considered as oligopolistic market
industry in Malaysia. From this article, oligopolistic market is shown in a very detailed
analysis done by Taurus Brown. The comparison between each firms and the revenue
received by each firms reflects the oligopoly characteristics that has been mentioned. This
article also shown the detailed analysis on mobile internet and data plan provided by the
firms to the consumer. However, the analysis will be covered only for the basic
telecommunication revenue or considered as revenue from mobile voice. Mobile voice has
been a status quo and the largest part in generating revenue for telecommunication firms. In
term of communication and multimedia industry, the article shows that telecommunication
contributes the highest revenue. (Figure 1)
Analysis
All telecommunication firms offer the same services. Although it is the same, the price may
vary but still in the close range of pricing. The packaging and marketing of products must be
creative in order to look appeal to the targeted market as Maxis and Celcom have done. Even
though the price of each product from all telecommunication firms may have slight
difference, it is still in the range of price that is considered as oligopoly market price.
The homogenous services provided by the telecommunication firms across the
industry without regulated pricing have created a market that is highly price-sensitive. It
means that the changes in price will affect heavily in the quantity demanded from the market
as it is oligopolistic market. The consumer might change to other service provider if the price
increased. The demand curve in oligopolistic market will be inelastic as only few firms that
provide the service. The demand for each individual firm may vary as the consumer is
switching between these few firms. The graph below shows the inelastic demand curve in
oligopolistic market. (Graph 1)
Based on Figure 2, it is found that pricing plays a significant factor for a consumer
stays loyal towards the telecommunication service provider. A slight increase in price may
reduce the quantity demanded of the telecommunication service for each individual firm.
Therefore, a rise in price made by a firm will not be followed by the competitors as it may
lead to a fall in quantity demanded which is greater that the increase in price.