Studied by 2 people
what is oligopoly?
when the market is dominated by a few large firms (like honda, toyota, ford)
what are the features? (part 1/5)
few firms
large firms dominate
different products ; usually close substitutes, but some difference
what are the barriers to entry? (2/5)
markets likely to benefit
high set up cost
high profit enjoyed by firms brings in new entrants!
whats price competition and its points? (3/5)
market leader sets the price n’ others follow to prevent price war
if one cuts the price, others need to follow otherwise theyll lose sales
price war lasts for some time
firms have interdependence
if one firm cuts the price others need to make changes (matching prices, investing)
whats collusion and the points? (4/5)
collusion: informal agreements between firms to restrict competition
its illegal and exploits consumers
firms might agree to share the market GEOGRAPHICALLY (no competition)
price fixing (they agree on charging higher prices)
supply output is low and the price goes up
what are the NON-price competition points? (5/5)
when competitors use ads, coupons, loyalty cards to prevent price wars
to identify a brand, they use a specific symbol or smt
product differentiation
real difference: design, material, skill
imaginary: advertising, branding
interdependence meaning?
actions of one country or large firm having a direct affect on others
price war meaning?
when one firm in industry changes the price and others have to follow
adv of oligopoly?
advantages:
choice: (new brands, products, niche market)
quality: ads and promotion tricks consumer to thinking itll be better
EOS: exploits for lower price
innovation
price war: keeps prices stable, helps consumer w/ uncertainty & they benefit from it
disadv of oligopoly?
consumer cant benefit if theres no competition
if the firm restricts comp (price fixing), consumers will pay higher
consumer suffers is market shared geographically
lack of choice
cartel → if successful = monopoly (illegal in EU and US)
genuine comp → customer benefits but collusion makes it worse
market niche meaning?
expensive service that only a few people can buy but still gives the company profit
cartel meaning?
when a group of firms join together and agree on pricing or output level in the market
Note 
Flashcard (32)