oligopoly market. Oligopoly conditions for the emergence of an oligopoly

". Another definition of an oligopolistic market would be a Herfindahl index greater than 2000. An oligopoly with two participants is called a duopoly.

Main features

When there are a small number of firms in the market, they are called oligopolies. In some cases, the largest firms in an industry can be called oligopolies. The products that the oligopoly supplies to the market are identical to the products of competitors (for example, mobile communications), or have differentiation (for example, washing powders). At the same time, price competition is very rare in oligopolistic markets. Firms see profit opportunities in the development of non-price competition. As a rule, it is very difficult for new firms to enter the oligopolistic market. Barriers are either legal restrictions or the need for large initial capital. Therefore, big business is an example of an oligopoly.

Of particular importance to the functioning of oligopolies is their awareness of the market. Given the ability of competitors to expand production, each firm is afraid of rash actions that reduce its market share. Therefore, awareness is one of the mandatory conditions existence. The behavior of each firm in the market has a clearly justified logic of actions and therefore is called strategic. Over time, strategies can be adjusted, but such changes are of a medium or long-term nature.

Typology of oligopoly models

The behavioral strategies of oligopolies are divided into 2 groups. The first group provides for the coordination of actions by firms with competitors (cooperative strategy), the second - the lack of coordination (non-cooperative strategy).

cartel model

The best strategy for an oligopoly is to collude with competitors over production prices and output volumes. Collusion provides an opportunity to increase the power of each of the firms and use opportunities to obtain economic profit in the amount that the monopoly would receive if the market were monopoly. Such collusion in economics is called a cartel.

In the antitrust laws of most countries, collusion is prohibited, therefore, in practice, cartels are either international (OPEC cartel) or secret.

A feature of the existence of cartels is their fragility: cartel members are always tempted to get a higher income in short term, breaking the agreement, and when this happens, the cartel breaks up.

Price (Volume) Leadership Model

As a rule, among the set of firms, one stands out, which becomes the leader in the market. This is due, for example, to the duration of existence (authority), the presence of more professional staff, the presence of scientific departments and the latest technologies, a higher share of them in the market. The leader is the first to make changes in price or output. At the same time, the rest of the firms repeat the actions of the leader. As a result, there is consistency common action. The leader should be the most informed about the dynamics of demand for products in the industry, as well as about the capabilities of competitors.

Cournot model

The behavior of firms is based on comparing independent forecasts of market changes. Each firm calculates the actions of competitors and chooses a volume of production and a price that stabilizes its position in the market. If the initial calculations are wrong, the firm corrects the selected parameters. After a certain period of time, the shares of each firm in the market stabilize and do not change in the future.

Bertrand model (price war model)

It is assumed that each firm wants to become even larger and ideally capture the entire market. To force competitors to leave, one of the firms begins to reduce the price. Other firms, in order not to lose their shares, are forced to do the same. The price war continues until only one firm remains in the market. The rest are closed.

Universal Interdependence

Since there are few firms in the market, sellers need to develop growth strategies for their firm so that they are not forced out of the market by competitors. Since there are few firms in the market, companies closely monitor the actions of competitors, including their pricing policy who they work with, etc.

Price policy

Price policy oligopolistic company plays a huge role in her life. As a rule, it is not profitable for a firm to increase the prices of its goods and services, since it is likely that other firms will not follow the first one, and consumers will "pass" to a rival company. If the company lowers the prices of its products, then in order not to lose customers, competitors usually follow the company that lowered prices, also reducing the prices of the goods they offer: there is a “race for the leader”. Thus, so-called price wars often occur between oligopolists, in which firms set a price for their products that is no higher than that of a leading competitor. Price wars are often detrimental to companies, especially those that compete with more powerful and larger firms.

The problem of price stability in an oligopoly

A feature of the oligopoly is their high excess capacity, which allows, if necessary, to significantly increase the volume of production. Therefore, before changing prices and tariffs, each firm should analyze the possible actions of competitors. In oligopolistic markets, most often, there is price stability. It can be explained using the broken demand curve model. Suppose the original price is P1, the quantity is Q1. If the firm decides to lower the price and increase demand for the product, then the competing firm will do the same in order not to lose its market share. Therefore, the increase in demand will be small, and the demand itself will be characterized by low elasticity. If the firm begins to increase the price, then competitors will not change their price, thereby hoping to get additional buyers. As a result, when the price increases, the firm will face a large reduction in demand. This suggests that it will be elastic. Combining 2 demand graphs, we get its single dynamics (broken graph curve demand).

In order to determine the behavior of the firm with such demand, it is necessary to compare the MR and MC of the firm. A single MR chart will consist of 2 parts with a vertical gap between them. The presence of this gap allows us to conclude that an increase in costs from MC1 to MC2 will not lead to a change in production volume and price. Thus, an oligopoly is a structure that very rarely changes the price of its products and the volume of its production. The change occurs only in the case of significant shocks: a sharp increase in resource prices, a significant increase in taxes.

Cooperation with other companies

Some oligopolists act according to the principle "don't have a hundred rubles, but have a hundred friends." Thus, firms enter into partnerships with competitors such as alliances, mergers, conspiracies, cartels. For example, the air transportation oligopolist, Aeroflot, entered into the Sky Team alliance with other world airlines in 2006, the oil-producing countries united in OPEC, often recognized as a cartel. An example of a merger between two companies is the merger of Air France and KLM. By uniting, firms become more powerful in the market, which allows them to increase output, change the price of their goods more freely and maximize their profits.

Using Game Theory

Game theory is a theory of the behavior of subjects under conditions when the decisions of one of them affect the decisions of all the others. It is used to analyze the actions of both individuals and firms.

Worked in economic literature oligopoly models do not always take into account the circumstances of the formation of oligopolistic markets and the impact of various changes on them. A universal tool for describing the behavior of an oligopoly is game theory. Its essence is to identify options for action, the possible consequences of a sequence of actions, and then conduct an analysis to find the best option for each of the parties. The process of such analysis is called a game.

The main drawback of game theory is the great dependence of the result obtained on the model of subjects' awareness, whose real awareness may remain unknown.

Oligopoly and efficiency

Oligopoly has positive aspects and disadvantages that affect efficiency. To positive traits include:

Active funding for R&D.
Intense non-price competition leads to increased differentiation in the market.
Unlike monopolistic competitors, an oligopoly pursues many more directions.

The negative features include:

Using the possibility of collusion, the oligopoly can behave like a pure monopolist.
Oligopolies may not achieve economies of scale because they are smaller than monopolies.
Oligopolies are forced to engage in non-price competition, which increases costs.
Oligopolies are less subject to regulation due to constant interaction with other firms.
Sometimes firms do not strive to reach their full potential, compensating for higher costs with higher prices (x-inefficiency).

Market power: its sources and indicators

market power- the possibility of establishing and regulating prices in the market. Sources of market power:

Demand-side sources: market demand elasticity; the availability of substitute goods and the magnitude of the cross elasticity of demand for them; growth rates and temporary fluctuations in demand, etc.
Supply-side sources: technology features; legal barriers to competitors entering the industry; ownership of resources, barriers created by the firms themselves, etc.

Several indicators are used to determine market power:

Concentration Ratio: The percentage of sales of the top four or eight firms to total industry sales.
The Herfindahl-Hirschman coefficient is calculated as the sum of squares market shares of all firms in the industry and shows the degree of its concentration.
The Lerner coefficient is calculated as the ratio of the difference between the product price and marginal cost its production to the price of products and shows the level of monopoly power of the firm.
Bain's coefficient.

The use of one or more coefficients allows us to conclude that the market is monopolized, but this does not give an exact answer to an oligopoly or a monopoly. Therefore, as a rule, they use additional information.

An oligopoly occurs when there are a small number of firms in the market and barriers to entry are high.

Characteristic features of an oligopoly

An oligopoly is a market structure that has the following characteristics:

1) a relatively small number of firms;

2) barriers of different permeability that prevent new firms from entering the industry;

3) the product is homogeneous (for example, aluminum or steel) or differentiated (cars or drinks);

4) control over prices;

5) interdependence between all oligopolistic firms.

So, an oligopoly is characterized by a small number of firms (from 2 to 10), fenced with barriers that prevent new firms from entering the industry, have price control, but in collusion with other oligopolists.

The main feature of an oligopoly is that the number of firms is so small relative to the size of the market, each of the oligopoly firms recognizes a close relationship with each other. The theory of oligopoly is more complex than the theory perfect competition, pure monopoly or monopolistic competition. For example, a perfectly competitive firm only needs to equate marginal cost and marginal revenue. In the case of an oligopoly, things are not so simple. Since there is a general interdependence, the oligopolist earns marginal revenue by charging a higher price, depending on the response of competing firms. If their reaction is not provided, then the oligopolist will not receive marginal revenue (see Example 10.3).

Example 10.3

The Prisoner's Dilemma

The situation in an oligopoly with attempts to predict the behavior of competitors in the economic literature is explained by the example of two unlucky robbers. Two robbers at night with weapons went to rob a bank. However, almost at the bank, they stumbled upon a police ambush, and each of them ended up behind bars. Each of them was obliged to provide for the behavior of his colleague in misfortune: if they both "talk" - each receives 5 years in prison for attempted robbery; if only one "speaks" and the second remains silent, then the first one will be released, and the second one will sit down for 20 years; if both remain silent, then they receive 1 year for illegal possession of weapons. What should everyone do? As a rule, business comes to an end with that at first one, and then and the second robber "says".

General interdependence

An oligopoly is defined as a market with a relatively small number of firms, but each firm must take into account the response of competing firms. One firm must anticipate how competing firms will react to its actions, etc. If firms in an area need to consider the response of competing firms, then the industry is characterized by general interdependence.

So, general interdependence is the main feature of an oligopoly. The actions of one firm affect other firms in the industry. When deciding on prices, quantity and quality of a product, an interconnected firm needs to take into account the reaction of competing firms. The competitor firm, reacting to the actions of the first firm, must consider how the first firm will react to its actions.

In some oligopolistic industries, the type of reaction may be well understood by all participants; it may be dictated by custom or convention. In other industries, the response of competing firms may be unpredictable, and participants must use strategic behavior to anticipate and outmaneuver their rivals (see Exhibit 10.4).

Example 10.4

The collapse of the cocoa producers' organization

The International Organization of Cocoa Producing Countries (COCO), which was based in London, set its price for cocoa by buying excess cocoa whenever there was a threat to lower the price below the level it had set.

In 1977, cocoa prices were high: approximately $5,500 per 1 ton. Real profits of $5,500. for each ton, cocoa producers in the area could receive cash, but this real income acted as a magnet, attracting new producers to the market. Expecting high prices, new planters planted cocoa trees in countries such as Brazil, Cote d'Ivoire and Malaysia. As soon as new cocoa producers entered the market, the market price began to fall. ISSO agreed to buy excess cocoa to support the price, but this lasted only until February 1988, when the volume of cocoa that was stored in warehouses reached 250 thousand tons. Since the international organization of cocoa producing countries could not keep the price at the same level, the price decreased to $ 1,600 per 1 ton.

Bankruptcy example international organization cocoa producing countries illustrates one of the key pricing problems of oligopolies: how to keep other producers out of the market when the price is high enough to generate monopoly profits.

Strategic Behavior

Firms A and B are oligopolists and they are interconnected. The profit of each firm depends on the price set by the other firm. Assume that the prices of two goods are the same and both firms receive absolutely equal profits. If one of them lowers the price slightly, then, despite this, it will receive high profits, while the firm with a higher price will receive lower profits.

On fig. 10.5 presents possible results. Each company has the opportunity to choose the price: 20 or 19 UAH. Firm A's price choice is illustrated on the left side, and Firm B's is illustrated along the upper horizontal. The profits that Firms A and B earn depend on the prices they charge. Firm A's profit is shown in the lower left corner of each rectangle, and Firm B's profit is in the upper right corner. If firms set a price of UAH 20, then both receive UAH 2,500 each; if they set the price at UAH 19, then both receive UAH 1,500 each. If one firm sets the price at UAH 20 and the other at UAH 19, then the firm with the lower price receives UAH 3,000, while the firm with the higher price receives only UAH 1,000.

Rice. 10.5. Profit making by an oligopoly that consists of two firms

Each rectangle (sector) shows the profit that firms receive at various combinations of prices that they themselves set. If firm A sets a price of 19, and firm B - 20 UAH, then firm A makes a profit of 3000, and firm B - 1000 UAH. What strategy should each firm follow?

It is clear that the oligopolist begins to receive high profits (at the expense of another firm) by setting more low price, provided that the competitor maintain a high price. Both firms will earn less profit if both lower their prices. If both set a higher price, then each of them makes a larger profit. However, each oligopolist has to set the price without knowing what the other firm is going to do.

Reasoning governs the price decisions of the oligopolistic firm? These may be assumptions about how the competitor firm will react. The reasoning could be something like this: "My competitor will not dare to set a higher price - 20 UAH, fearing that I will set a low price - 19 UAH. Thus, if I set a high price - 20 UAH, I will receive only 1000 UAH., And if I choose a lower price - UAH 19, then I will get UAH 1500. So, I will set a low price - UAH 19". If the competing firm thinks the same way and decides to charge a lower price, it turns out that both firms correctly predicted each other's actions and chose the appropriate strategy.

In such a situation, both firms would decide to set the price at UAH 19 and would make a profit of UAH 1,500 each. However, they know that if they bid UAH 20, they could make a profit of UAH 2,500. If firms A and B made the same price decisions over the long run, then it is likely that they somehow knew that they would get richer if they set prices higher. Firms could learn to cooperate and choose a strategy (price 20 UAH) that maximizes the profits of both. There is another method by which both firms decide to set a price of UAH 20 - they could agree that both set a high price.

Oligopoly based on collusion

If oligopolists have learned to cooperate, then they begin to receive high incomes. A conspiracy within an oligopoly can be carried out in various forms. Oligopolists can secretly agree on prices and output volumes. They can officially register this in a secret deal (but such agreements are illegal) or open (provided that such agreements are legal and even agreed with the government of the country). The conspiracy can be carried out in free form, that is, based on customs and traditions, or in the form of an informal agreement. The effectiveness of such collusion is different for different oligopolies. In some cases, the conspiracy is quite reliable, and in some cases it is fragile and tends to collapse.

Cartel

For an oligopoly, a simple means of reconciling pricing and output policy is to form a cartel that obliges all parties to set certain prices and a certain market share for each producer. With any luck, such an agreement will allow oligopolistic firms to receive monopoly profits in the industry as a whole.

So, cartel is an agreement by which the oligopoly companies coordinate the volume of output and pricing in order to obtain monopoly profits.

On fig. 10.6 illustrated an oligopolistic industry that consists of three firms (which produce the same product at the same cost). Each of the three firms agrees to 1/3 of the market and sets the same monopoly price. Since all three cartel member firms have agreed to divide the market equally, then firm A's demand will equal 1/3 of the market demand, etc. Firm A's monopoly price lies at the intersection of the marginal revenue curve with the marginal cost (MC) curve. With such a demand curve, firm A will maximize its profit by producing 100 units of goods at a price of 50 UAH per unit. Other 2 firms also offer the price of 50 UAH. and produce 100 units each. The volume of output in the whole industry is 300 units. (100 o 3).

Firm A, however, is tempted to deceive rivals. While two other firms are selling 200 units at a price of 50 UAH, firm A could set a price of 49.5 UAH and sell slightly more than 1/3 of the market. The price of UAH 49.5 undoubtedly exceeds firm A's marginal cost (UAH 20). The actual real income will go to the firm that violates the agreement. Firms B and C are prone to the same temptation. If they "cheat" for a short time (and no one else does the same), they can increase their income. Violation of the agreement is a cost to them in long term. If other firms discover the deception, they break the agreement. As a result, a price war may flare up and economic profits will decline.

Lust for profit underlies the creation and collapse of cartels. Cartels bring a part of the monopoly profit to their members for as long as each of them adheres to the cartel agreement. However, each of the members of the cartel can make large profits by fraud, provided that others do not cheat. Cartel members face a dilemma. If one "cheats" and the other does not, then the "cheater" wins. If both are playing a dishonest game, then both lose. If both will abide by the agreement, then such a provision is beneficial for them than the option when one "cheats". But each of them is prone to deceit.

Cartels are unstable because it's hard enough to force agreements on someone. Very few cartels are successful over the long term. Most of the cartels that were involved in the sale of sugar, cocoa, coffee, quickly disappeared or did not have a significant impact on prices. There are many examples of cartels that are based on pricing agreements. Representatives of the states that are members of the Organization of the Petroleum Exporting Countries (OPEC) regularly hold meetings that are widely covered by the world press. They are held to harmonize oil prices. Thus, the International Air Transport Association also holds open meetings with the consent of the governments of the participating countries.

Many cartels appear and disappear despite the fact that the government provides them legal assistance. They, as historical experience shows, are traditionally unstable, since it is very difficult to force someone to collude. The thirst for profit leads to the fact that the cartels disintegrate. Very few cartels operate successfully over the long term. Even the most successful cartel in history, OPEC, has failed to set a strictly monopoly price. There are too many temptations for its members (especially those who need cash) to break the agreement.

Barriers to Conspiracies

There are many obstacles that reduce the chances of an effective and credible conspiracy within the cartel. Competitive struggle between cartel members intensifies when there are:

1) a large number of sellers;

2) low barriers for new firms to enter the industry;

3) the presence of a differentiated product;

4) high rates of scientific and technological progress;

5) high fixed costs and low marginal costs;

6) legal restrictions (for example, antitrust laws). A large number of sellers. The more sellers or firms in

industry, the more difficult it is to create a reliable cartel. With a very large number of members, it is quite difficult to establish contacts between participating firms. Small firms that have signed an agreement are more susceptible to the temptation to break it: not only are they less well-known than large firms, but they can also suffer from megalomania.

Low entry barriers for new firms in the industry. If new firms can easily enter the industry, then existing firms will not want to enter into deals to increase the price. With sufficiently free access to the industry, prices cannot be significantly higher than the cost of production.

The presence of a differentiated product. The more diverse or differentiated the goods, the more difficult it is to come to an agreement in such an industry. Reaching an agreement can be both unprofitable and profitable. Achievements will be more unprofitable in the presence of a differentiated product. For example, steel is homogeneous and agreement on prices and market share among steel corporations can be easily reached. But it is quite difficult to conclude an agreement between aircraft manufacturers on prices for the DC-10 and Boeing-747 due to a discrepancy regarding quality.

High rates of scientific and technological progress. With the high rate of scientific and technological progress, a conspiracy may not be possible, since now the industry is constantly releasing new products and developing new technology. A firm that uses an innovation can make more profit than within a cartel. It is difficult enough to imagine the existence of a conspiracy between Kodak and Polaroid or IBM and Apple.

High fixed costs and low marginal costs. higher fixed costs, Related total costs marginal cost is usually low. The temptation to "cheat" in a cartel is a function of the difference between price and marginal cost. Thus, relatively high fixed costs encourage certain cartel members to "fraud".

Legal restrictions. The Sherman Antitrust Act (1890) in the US says that associations intended to restrict trade are illegal. Such legislation can certainly prevent conspiracies and thus price increases from cartels.

Since each industry is marked by product differentiation, entry conditions, number of firms, relative rates of marginal and fixed costs, the pace of technological progress, then the degree of oligopolistic coordination cannot be the same. So, some oligopolies, unlike others, can enjoy almost monopoly power.

The term oligopoly comes from the Greek words oligos (several) and poleo (sell).

Fundamental due to the small number of firms on the market are their special relationship, manifested in close interdependence and sharp rivalry between. In contrast to or pure monopoly, in an oligopoly, the activity of any of the firms causes a mandatory response from competitors. This interdependence of the actions and behavior of a few firms is key characteristic of an oligopoly and applies to all areas of competition: price, sales volume, market share, investment and innovative activity, sales promotion strategy, after-sales services, etc.

We have already mentioned coefficient of volume, or quantitative, cross elasticity of demand, which serves to quantify the interdependence of firms in the market. This coefficient shows the degree of quantitative change in the price of firm X with a change in the firm's output Y on the 1% .

If the volume cross elasticity of demand is equal to or close to zero (as is the case under perfect competition and pure monopoly), then an individual producer can ignore the reaction of competitors to his actions. Conversely, the higher the elasticity coefficient, the closer the interdependence between firms in the market. Under oligopoly Eq>0, however, its exact value depends on the specifics of the industry in question and specific market conditions.

Homogeneity or differentiation of the product

The type of product produced by an oligopoly can be either homogeneous or diversified.

If consumers do not have a particular preference for any brand, if all products of the industry are perfect substitutes, then the industry is called a pure or homogeneous oligopoly. The most typical examples of practically homogeneous products are cement, steel, aluminium, copper, lead, newsprint, and viscose.
If the goods have trademark and are not perfect substitutes (moreover, the difference between goods can be both real (according to technical specifications, design, workmanship, services provided), and imaginary (brand name, packaging, advertising), then the products are considered differentiated, and the industry is called a differentiated oligopoly. Examples are the markets for cars, computers, televisions, cigarettes, toothpaste, soft drinks, beer.

Degree of influence on market prices

The firm's degree of influence on market prices, or its monopoly power high, although not to the same extent as under pure monopoly.

Bargaining power is determined the relative excess of a firm's market price over its marginal cost(under perfect competition P=MS), or

L=(P-MC)/P.

The quantitative value of this coefficient (Lerner coefficient) for the oligopolistic market is greater than for perfect and monopolistic competition, but less than for pure monopoly, i.e. fluctuates within 0

barriers

Market entry for new firms is difficult but possible.

When considering this characteristic, it is necessary to distinguish between the already established, slow growing markets and young, dynamically developing markets.

For slow growing oligopolistic markets characteristic very high barriers. As a rule, these are industries with complex technology, large equipment, high dimensions minimum efficient production, significant spending on sales promotion. These industries are characterized by positive , due to which the minimum (min ATC) is achieved only with a very large output. In addition, entering a market dominated by well-known brands inevitably leads to high initial investment. Only large competitive firms with the necessary financial and organizational resources can afford to enter such markets.
For young emerging oligopolistic markets it is possible for new firms to enter because demand expands quickly enough that an increase in supply does not have a downward effect on prices.

Characterized by the action of several sellers in the market, and the emergence of new ones is difficult or impossible.

If there are two producers in the market, then this type of market is called duopoly which is a special case of oligopoly, which is more common in theoretical models than in real life.

Oligopolistic markets have the following characteristics:

a small number of firms and a large number of buyers. This means that the market supply is in the hands of a few large firms that sell the product to many small buyers;
differentiated or standardized products. In theory, it is more convenient to consider a homogeneous oligopoly, but if the industry produces differentiated products and there are many substitutes, then this set of substitutes can be analyzed as a homogeneous aggregated product;
the presence of significant barriers to entry into the market, i.e. high barriers to market entry;
firms in the industry are aware of their interdependence, so price controls are limited.

Examples of oligopolies include manufacturers of passenger aircraft such as Boeing or Airbus, car manufacturers, household appliances etc.

Another definition of an oligopolistic market would be a Herfindahl index value greater than 2000.

The pricing policy of an oligopolistic company plays a huge role in her life. As a rule, it is not profitable for a firm to increase the prices of its goods and services, since it is likely that other firms will not follow the first one, and consumers will "pass" to a rival company. If the company lowers the prices of its products, then in order not to lose customers, competitors usually follow the company that lowered prices, also reducing the prices of the goods they offer: there is a “race for the leader”. Thus, so-called price wars often occur between oligopolists, in which firms set a price for their products that is no higher than that of a leading competitor. Price wars are often detrimental to companies, especially those that compete with more powerful and larger firms.

There are four models of price behavior of oligopolists:

broken demand curve;
collusion;
leadership in prices;
cost-plus pricing principle

Broken demand curve model was proposed by the American economist P. Sweezy in the 40s. XX century, which analyzes the reaction of an oligopolist to a change in the behavior of their competitor. There are two types of reaction of market participants to price changes by an oligopolistic firm. In the first case, when a firm raises or lowers prices, competitors can ignore its actions and maintain the same price level. In the second case, competitors can follow the oligopolistic firm, changing prices in the same direction.

conspiracy (cartel) when firms come to an agreement among themselves regarding prices, production volumes, sales.

Price Leadership- a model in which oligopolists coordinate their behavior by tacitly agreeing to follow the leader.

Cost-plus pricing- a model associated with the planning of output and profits, in which the price of products is set according to the principle: average costs plus profit, calculated as a percentage of the level of average costs.

Add to bookmarks

Add comments

Properties of an oligopoly

Market dominance by a small number of sellers oligopolists
Very high barriers to entry into the industry
An oligopolistic firm does not need to produce differentiated products to survive in the long run.
The decision of each firm affects the situation on the market, and at the same time depends on the decisions of other firms: when making a decision, the oligopolistic firm takes into account the possible reaction of other market participants. For this reason, in an oligopolistic market, the possibility of collusion is very high.
A small number of goods-substitutes for the products of oligopolists
An oligopolist can be both a price maker and a price taker in the market
As a quantitative description of this form, the following ratio can be used - the share of the four leading firms in the industry should be more than 40%.

Universal Interdependence

Broken demand curve model: point P(none) - if the firm sets the price of the product above this level, then competitors will not follow it

Price policy

Cooperation with other companies

Some oligopolists act according to the principle "don't have a hundred rubles, but have a hundred friends." Thus, firms enter into partnerships with competitors such as alliances, mergers, conspiracies, cartels. For example, the air transportation oligopolist, Aeroflot, in 2006 entered into the Sky Team alliance with other global airlines, the oil-producing countries united in OPEC, often recognized as a cartel. An example of a merger between two companies is the merger of Air France and KLM. By uniting, firms become more powerful in the market, which allows them to increase output, change the price of their goods more freely and maximize their profits.

Game theory

Theories of oligopolistic pricing

To model the behavior of firms participating in the market in the theory of oligopoly, methods of game theory are used. The most famous oligopoly models are:

Gutenberg model
Edgeworth model

Organizational and economic forms of concentration

Cartel - a form of association, a public or tacit agreement between a group of enterprises with similar profiles on sales volumes, prices and markets;
Syndicate - a form of association of enterprises producing homogeneous products, organizes collective sales through a single trading network;
A trust is a form of association in which the participants lose their production and financial independence.
Consortium - a temporary association of enterprises on the basis of a common agreement for the implementation of a project;
A conglomerate is an association of diversified firms. Usually saved high degree independence and decentralization of management;
Holding - a parent company that controls the activities of other companies, may not be engaged in production activities;
A concern is an association of enterprises bound by common interests.

In the vast majority of countries in the world, the processes of business combinations are controlled by antitrust laws.

Notes

Literature

Nureev R. M., "Course of Microeconomics", ed. "Norma", 2005
F. Musgrave, E. Kacapyr; Barron's AP Micro/Macroeconomics

Wikimedia Foundation. 2010 .

See what "Oligopoly" is in other dictionaries:

A situation in the market in which a small number of fairly large sellers opposes a mass of relatively small buyers, and each seller accounts for a significant part of the total supply in the market. Dictionary of financial terms. ... ... Financial vocabulary

- (oligopoly) A market in which a relatively small number of sellers serve many buyers. Every seller is aware that he can control his prices up to a certain level and that his profits will be affected by the behavior of his competitors... Glossary of business terms

- (oligopoly) A situation in the market where there are several sellers, each of which evaluates the behavior of others. Each firm controls a fairly significant portion of the market, given the individual reaction of other market participants to reduce their ... ... Economic dictionary

- [Dictionary of foreign words of the Russian language

oligopoly- State commodity market, in which a very limited number of operators, usually large corporations, operate on it. Almost oligopolistic in all countries automotive markets, since the number of car manufacturers is quite ... ... Technical Translator's Handbook

- (from oligo... and Greek poleo sell, trade), type market structure economy, in which several large firms, companies provide the vast majority of industry production and sales of products ... Modern Encyclopedia

- (from oligo ... and Greek poleo I sell I trade), a term denoting a market situation when several large competing firms monopolize the production and marketing of the bulk of products in the industry ... Big Encyclopedic Dictionary

- (from Greek oligos small and poleo I sell) eng. oligopoly; German Oligopol. A type of market structure in which a few large competing firms monopolize the sale of the bulk of products in a given industry. see MONOPOLY. Antinazi. Encyclopedia ... Encyclopedia of Sociology

oligopoly market. Oligopoly conditions for the emergence of an oligopoly

Main features

Typology of oligopoly models

cartel model

Price (Volume) Leadership Model

Cournot model

Bertrand model (price war model)

Universal Interdependence

Price policy

The problem of price stability in an oligopoly

Cooperation with other companies

Using Game Theory

Oligopoly and efficiency

Market power: its sources and indicators

Homogeneity or differentiation of the product

Degree of influence on market prices

barriers

Properties of an oligopoly

Universal Interdependence

Price policy

Cooperation with other companies

Game theory

Theories of oligopolistic pricing

Organizational and economic forms of concentration

see also

Notes

Links

Literature

See what "Oligopoly" is in other dictionaries: