The Oligopoly Market: Example, Types and Features Micro Economics

Undoubtedly, there are other operating systems for smartphones; however, their market share is so insignificant that those are not even considered a part of the smartphone industry. Because there is no dominant force in the industry, companies may be tempted to collude with one another rather than compete, which keeps non-established players from entering the market. This cooperation makes them operate as though they were a single company. While not a single-company-dominated monopoly, oligopolies erect significant barriers to entry, effectively keeping out new upstarts from becoming competitors. If the firms produce homogeneous products, then it is called pure or perfect oligopoly.

But because the only competitors are a small number of airlines, and customers who need to travel long distances or overseas don’t generally have options other than flying, prices still stay relatively high. When companies within the same industry work together to increase their mutual profits instead of exclusively competing with one another, it is known as an oligopoly. Oligopolies are observed throughout the world and even appear to be increasing in certain industries. Syngenta, owned by a Chinese chemical company, ChemChina, plays a major role in the global food system. Its primary products include pesticides, herbicides, insecticides, fungicides, and biofuel. In the context of the social media industry, a small number of large companies have significant control over the market.

These three are also considered as ‘Big three’ of the music industry, which is enough to show the oligopolistic nature of this industry, and their combined revenue is over $20 billion. Nowadays, people are opting more for online streaming services over downloading their music. Thanks to this phenomenon, services like Apple Music and Spotify are quickly becoming the go-to choice for music. The majority of the industries in the U.S. have oligopolies that are dominated by a few large corporations.

Thus, advertising has a great importance in an oligopoly strategy. In order to match the impacts induced, the competitor firms might change their prices and profits. Thus, the oligopoly market is a totally interdependent network.

Only those firms enter into the industry which is able to cross these barriers. Prior to this deal, the Adani Group had no capacities in cement manufacturing. But it is a significant consumer, with large operations in infrastructure sectors such as airports, ports, logistics facilities and power plants. Such business synergies apart, cement as a business has delivered market-beating returns in the past two decades. This is because they are the leaders in new drug innovation and the price maker for drugs. The top three companies we can refer to in our example are Novartis, Merck, and Pfizer.

The kink is present at the intersection of the two demand curves. Mukherjea of Marcellus Investment Manager says such companies are the source of investment, innovation and wealth creation. While critics may raise a hue and cry, the anti-trust regulator, Competition Commission of India (CCI), does not see the Reliance-Future deal affecting competition in the retail sector. While oligopoly is the market strategy that involves a number of producers in the market. The upper limit of the number of producers in oligopoly is not fixed.

Another key player in this industry is Apple, and its operating system, macOS, is used by 12% of global computer users. Although there are other operating systems like Chrome OS and Linux, these are virtually non-existent. With such strict distribution of the market share, new companies find it impossible to enter this market. An oligopoly is a market structure that consists of a small number of firms that have substantial influence over a certain industry or market. While the group holds a great deal of market power, no one company within the group has enough sway to undermine the others or steal market share.

The landscape of India’s cement oligopoly, in five charts

If the firms produce a homogeneous product, like cement or steel, the industry is called a pure or perfect oligopoly. In India, markets for automobiles, cement, steel, aluminium, etc, are the examples of oligopolistic market. In all these markets, there are few firms for each particular product. Oligopoly refers to a market situation in which there are a few firms selling homogeneous or differentiated products. Oligopoly is, sometimes, also known as ‘competition among the few’ as there are few sellers in the market and every seller influences and is influenced by the behaviour of other firms. Businesses, though exist in small numbers, let customers choose, even if limited.

More often, though, they arise due to industry consolidation and protectionism, either due to government interference or other factors. The limited number of competitors creates an oligopoly, even if the companies aren’t deliberately colluding with each other. For example, these laws can implement a price ceiling to limit how high prices in an oligopoly are set. Some governments give incentives to new companies to increase competition. It has seen significant growth, with ‘streaming now’ generating more revenue than digital downloads. The US is the second-largest smartphone market after China, with over 260 million users.

1. On a standalone basis, Shree has the second-largest capacity, at 43 million tonnes.
2. As the name suggests this is an organized structure of oligopoly.
3. An oligopoly is different from a monopoly, which is dominated by only one major player in the market.
4. Android has become more popular than Windows due to the rise of smartphones in recent years.
5. By following this, even though the scalability of the TV channels will get limited to an extent across those ranges, all the players can coexist, and that too with relative gains.

Types of Oligopoly Market

When it comes to electricity, it is understandable to think that it is a public sector, after all, we pay the government. Interestingly, the electric utilities are privatized, at least in the United States, and not just that, there are over 3,000 electric utility companies in the country. Despite such a large number of companies supplying electricity, only four of them dominate this industry, which are NextEra Energy Inc, Dominion Energy, oligopoly examples in india Duke Energy, and Southern Company. While the remaining 2,996 companies are valued in millions, each mentioned company is estimated at over $60 billion.

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Although the name might sound funny or a form of geometry, it is a term used to describe a specific type of market structure in economics. Once an industry or a sector is taken over by at least two independent firms or companies, it is considered an oligopoly. While it is significantly beneficial to dominating firms, it returns minuscule profits to small organizations. Moreover, once certain firms gain a significant share of a market, the barriers to entering that specific market are raised drastically, making it difficult for new competitors to operate. Besides that, dominating companies may even sign an agreement to set a specific price for their products or service. This results in no competition among the brands and easy profit for the companies.

In June 2020, Fox News drew about 3.97 million viewers during evening hours. Although digital newspapers and websites have experienced tremendous growth in popularity in recent years, most people still consume news on television. The majority of American households have more than one television, and about 99% of households have at least one television. To better explain this phenomenon, we have presented the thirteen best examples of oligopoly in different industries. With a small group of firms, every oligopolist is aware of the actions of others.

During the same period, leaders UltraTech, ACC and Ambuja all delivered a CAGR above 17%, with Ambuja leading at 19.1%. Further, while they have experienced a post-pandemic spike in returns, over a longer period of time, the returns delivered by them have been steady. One reason for this is the oligopolistic nature of the industry, which has a few firms dominating production and market share. It can be seen in their decisions of launching small cars, the sequence in which they raised the prices of cars which clarifies that these three players took a united and well thought of strategy. One may distinguish among the three based on prices, but based on features, all are distinct.

Airlines

Unless there is evidence of past misconduct of dominance, which is abusive and harming – for the market, other stakeholders and consumers – there is no justification for maligning a company or a firm. In July last year, Mumbai residents complained about a sharp increase in electricity bills after Adani group took over retail electricity distribution from Anil Ambani’s Reliance Infrastructure. Then there is Asian Paints in the paint segment with 40 per cent market share. According to experts, some of these businesses have created entry barriers – regulatory or technology driven – which are insanely high. And, if we minutely observe, the sector shows group behavior as well. You can yourself check that the prime time for every channel is different.