Oligopoly Dissertation Example

Oligopoly dissertation

Contrary to popular belief, not all markets are similar. They are as different as they come since some possess characteristics that set them apart from the rest. As a result, such differentiation factors have resulted in markets such as competitive, monopoly, and oligopoly situation. In this paper, the focus will be on highlighting the attributes that define the oligopoly market situation and how it forms with time.

Oligopoly market

As indicated by Investopedia (n.d.), an oligopoly constitutes a market with more than two operators. However, the number is fewer than that of the competitive market. The overriding factor in an oligopoly is that the operators possess unique attributes that set them apart from the rest. In short, they tend to embrace differentiation such that no operator is similar to any other. Each presents unique product offerings to the market and possesses the competitive advantage that sets them apart from the rest. As a result, it is not easy to lock out the rest by maximizing their differentiation aspects (Bloch & Bhattacharya, 2014). The operators have to be creative enough to devise ways to extinguish the competitive advantage by their main rivals.
In an oligopoly, firms are easily affected by the actions of competitors than in other markets. Mainly, such moves tend to have far-reaching consequences on their activities. As mentioned, oligopoly markets have few operators. Therefore, actions by competitors will have direct impacts on the operations of all the active members in this market. Each operator will try as much as possible to counter the new development with the appropriate responsive strategies and tactics. From this brief analysis, an oligopoly seems to be one market system where the operators are always moving back and forth in efforts to outdo their rivals.

Oligopoly formation

In most cases, oligopolies result from mainly two scenarios. The first is when operators opt to collude to charge higher prices. In many cases, this happens when the operators in a competitive market realize their actions only result in their downfall. Therefore, they opt to join forces to take advantage of amalgamated operations or economies of scale. The second aspect is where it occurs naturally. For instance, industries with higher barriers of entry will have fewer operators. Whereas these operators might not necessarily collude, their actions and operational strategies will result in an oligopoly market situation.

Oligopoly market advantages

As mentioned, oligopolies contain very few operators. Due to this fact, these firms enjoy the rare opportunity to charge higher prices. Only a monopoly enjoys such a privilege by default. However, the small number of operators in an oligopoly implies that they can agree to charge higher prices. Even in the natural setting, this remains to be the case since each possesses their unique attributes (Lardon, 2017). Therefore, they can remain operational even if competitors implement new strategies that do not eradicate their competitive advantage.
Due to the differentiated nature of services, firms in an oligopoly need not to channel too much resource towards the marketing function. Only campaigns aimed at increasing the level of general market awareness are necessary. The operators do not have to keep setting aside hefty amounts for marketing.

Industries characterized by oligopoly

Oligopoly markets constitute a small percentage of the overall economy. However, they play the most critical role as compared to other markets combined. For instance, some of the reputable companies in the world are in the oligopoly market set up. An example is the soft drink industry where Coca Cola Company and PepsiCo engage in cut-throat competition. The other industry is in the technology industry where dominant operators such as Apple Inc. and Samsung seem to have stifled competition from the third party and smaller operators on the global scene.

Conclusion

Oligopolies present a different mode of operation as opposed to other types of markets. They constitute a lower percentage of the market. However, one unique characteristic that sets them apart is that they possess fewer operators and charge relatively higher prices. They also remain to be the most competitive with operators seeking to react to the actions of rivals at any given instance.

References

• Bloch, H., & Bhattacharya, M. (2014).“Kurt Rothschild’s heterodox approach to price theory and oligopoly” History of Economics Review, (60), 1-14.
• Oligopoly. (n.d). in Investopedia. Retrieved from http://www.investopedia.com/video/play/oligopoly/Lardon, A. (2017). “Endogenous interval games in oligopolies and the cores” Annals of Operations Research, 248(1-2), 345-363.