Professional Documents
Culture Documents
MY Final Oligopoly
MY Final Oligopoly
PUBLIC POLICIES
BYNEHA
VARSHA PANDEY
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
Large barriers to entry
Development costs
Importance of reputation
Highly differentiated, complex products
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.
Duopoly
Cartel
A group of firms acting in unison.
unethical:
If a
manufacturer sells to retailers only on condition that they agree to
charge the same set retail prices for its goods, it is engaging in
retail price maintenance. A manufacturer may publish
suggested retail prices and may even refuse to sell to retailers who
regularly sell their goods at lower prices. It is illegal, however, for
retailers to enter an agreement to abide by the manufacturers
prices and illegal for manufacturers to force retailers to enter such
an agreement.
Bribery
Bribes used to secure the sale of products by shutting out other
sellers results in a decline in market competition, and therefore are
unethical. Bribes used for other purposes, e.g. a tip to accelerate
the process, a tip to lower a costly tariff, will not have the same
effects. Bribes of this sort are unethical if
The offer of a payment is initiated by the payer; and
The payment made to induce the payee to not act in the best interests of the
pubic; and
The nature and purpose of the payment are considered ethically objectionable
in the local culture
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.
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.
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.
ExampleDestroyer/Predatory
Pricing
Deliberate price cutting
or offer of free
gifts/products to force
rivals (normally smaller
and weaker) out of
business or prevent new
entrants
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
Anti-competitive and
illegal if it can be proved
Typical of oligopoly with
collusion
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