forrr

frmal prof
rofits
KOligopolyN m
It is a form of the market in which there is a few big sellers of a commodity and a large
Ter
umberof c buvers. Such seller has a significant share ofthe market. There is a high degree
endence among the sellers regarding their price and output
policy.
Lrp are only a few sellers, price and output decision of one seller significantly Because
impacts the
e and output decision of other sellers in the market. Accordingly, there is a severe
mpetition in the market (called cut-throat competition).
Example There are only a few auto-producers in the Indian market. Maruti, Tata, Fiat,
Eardand GM are some well known brand names.
51 Features of Oligopoly
FJoming are some principal features ofoligopoly:
g A Few Firms: A few firms, but large in size, dominate the market for a commodity.
Each firm commands a significant share of the market: it can impact market price of
the product.
@) Large Number of Buyers: There is a large number af buyers of a commodity. The
number is so large that no individual buyer (by varying his demand) can impact market
price of the product.
19) Barriers: There are various barriers to the entry of new firms. These barriers are
almost similar to those under monopoly. Entry of the new firms is extremely

difficult, if not imposible.

4) High Degree of Interdependence: There is a high degree of interdependence
ree
one firm significantly impacts
the price
Een the firms. Price and output policy of
reduces
of the rival firms in the market. For example, if GM Motors
Lput policy while taking an action
do the Accordingly,
SCars, Ford Motors may also same.
ofthe rival r n s
account the possible reaction
take into
e oroutput, a firm
i in the market. must

6) NotadusicaePoss Curve: It is not possible to deternine

Firm's Demand
L O Determine because, it is not possible to predict
demand curve under oligopoly. Simply not

chvange in
W h e n a firm lowers its
price, demand for its
product
maa

"ase, becauIse the rival firms ay also lower the price.

 ntrexducty
Formation of Cartels: Wtha vien to awedng npetton. titms 111a
na
R a tTmal agrrement among the firms to avond cnpetitno
prwes are
fivevt
nder t, output quotasant
odasive otigopolv thecartel.as a
tirm the acepied br
ket is 'uHelea
etmes kadng n mar
eader
theartel chose the ue piar as set b t * p r t
Colusive and
Non-Colhlushe Oligopoly
and ofigopoly
non-okusive
Oigopaly s broasy oasshed as cokusive oigopoy
in which there are
few firms in the market and al s.

Collusve oligopoly is a fom of he market and tx for themselves

colude to tomma carte,
competbon hrough a fomal agreement They marketS accepted by the carte
leding tm n the a roe
andmarke price Sometmes a leader.
as fred by the price
Merbers of the carnel accept the price
Non-colusie oligopoly s a fbm of the market in which there are tew fms in the marker d
Each hirm tres to increaseits
and ouput poicy independent of the mval tims.
pursues ks price means of profit maximisation 5
competion Compettion is preferred to coliusion as a CAUSe be
rugh there is a cut-throat competition.
a e only a s bg irms in he market

1. Basis of the Classification of Market

net is baady cassiaed itb three foms: ) Perfecty
Compebtve Market ( Monopoty () Moncoos
dassiñcaton are as under
Corpese Market Main basis of these
(9 Number of and Sellers in the Market: Ifthe number of buyers and selers is verylargeinhe
market, thenBuyers
such a market is caled compettive (Perfectly competitive and Monopolistic Compett
market On ne contary. f the number of buyers IS very large but seller is just one then it is caled
Monapoly. when buyers are in large number but sellers are few, it is called Oligopoly market.
2Nature of Commodity: If the commodity sold in the market is homogeneous then it will be taken asa
characeristic of perfect competition. On the contrary, product differentiation is the bass of
monopoistc competiton. in a monopoly market the product may or may not be homogeneous.
3) Degree ofPrice Control: Ifthe firm has full control over the price of the product sold in the market, then
tis te basis of monopoly. On the contrary, complete lack of control over price is the characteristico
pertect compeibon. But ifthe fim has partial control over the price of the product, it is the charactensc
f monopoisic competiton.

2. What is Market?
in orinay kanguage, market means a place where goods are bought and sold. From economic pointore
s conces of market is wrong. in economics, market is taken as a mechanism which facilitates conia
bebween the buryers and selers. This contact can be of any mode: direct contact ortelepnone
maketngis a new concept of marketing. In such mode ofmarketing, goods and services are traded wu
ellers
any geographical area. According to J.C. Edwards, "A market is that mechanism by whichbuyersand
e brougrt logether. t is not necessarily, a fixed place."