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Українські рефератиРусские рефератыКниги
НазваOligopolises (реферат)
РозділІноземна мова, реферати англійською, німецькою
ФорматWord Doc
Тип документуРеферат
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Oligopoly is a market structure under which only a few suppliers

dominate the market and the entrance of new suppliers is either

constrained or impossible. Usually, the oligopoly market is dominated by

2-10 firms, who have a joint share of the market of 50% or more.

Automobile, steel, air transport are common examples of oligopolies. Or,

in a global sense, we could call oil producer countries oligopolies and

OPEC – a cartel. At least some firms may influence price due to their

important contribution to the total output. Every firm in the situation

of oligopoly knows that if it, or its competitors either change prices

or output, the revenues of all the participants on the market will

change. That means that firms are interdependent. For example, if

General Morors Corporation decides to raise prices on its cars, it

should consider retaliative moves by Ford, Chrysler, and other

competitors in order to calculate the ultimate changes in sales.


It is generally assumed that every firm on the market realizes

that its changes in prices or output will cause other firms to

retaliate. The kind of retaliation any supplier expects from its

competitors as a reaction to his changes in prices, output, or change of

marketing strategy is the main factor that influences its decisions.

That expected reaction also influences the balance of oligopoly markets.


Oligopolies may interact in two main ways:


Price wars, when a firm tries to increase it sales by reducing prices,

expecting that other firms will not be able to respond by doing the

same. This stops when no firm can low its prices anymore, which occurs

when P=AC and profit equals 0. Unfortunately for consumers, price wars

do not usually last long. Firms have temptations to co-operate with each

other in order to set up higher prices and to share markets in such a

way, as to avoid new price wars and their bad impact on revenues.


From the above factor results co-operation. Its closest form is a

cartel, when a union of oligopolies acts as a monopoly. Cartels are

illegal in many countries of the World.


Another reason for co-operation is to increase the entrance barriers to

prevent other firms (especially the so-called hit and run firms) to join

the market and drop prices. In that situation firms try to coordinate

their activities.



To answer this question, I first need to describe the way agreement

between oligopolies form. Let us suppose that there are 15 suppliers in

the area A who want to co-operate with each other. These firms set their

prices equal to their average costs. Each of the firms is afraid to

raise prices for the reason its competitors might not follow that move

and its profits will become negative. Let us suppose that the production

is at the competitive level Qc (pic. A), that corresponds to the

production quantity under which the demand curve crosses MC, which is a

horizontal sum of the marginal cost curves of each supplier. MC would

coincide with the demand curve if the market were perfectly competitive.

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