Monopoly & Oligopoly
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MANAGERIAL ECONOMIC’S
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Transcript of Monopoly & Oligopoly
MANAGERIAL ECONOMIC’S
MONOPOLY & OLIGOPOLY
PRESENTED BY -
MohammedDanishVikita Shah Saurabh KadamDeepika HayleSayali Ayaaz MominAkshata SawantPurva Pawaskar
PRESENTED BY• MohammedDanish• Vikita Shah • Saurabh Kadam• Deepika Hayle• Sayali • Ayaaz Momin• Akshata Sawant• Purva Pawaskar
Classification of market on basis of Location Time Competition
Market
Types of market
Perfect competition Monopolistic competition Monopoly Oligopoly
A market structure in which only one Producer or seller exists for a Product that has no close substitutes
Monopoly
OligopolyAccording to,
In economics ,a situation in which few companies control the major part of a particular market ………
OligopolyOligopoly is a market form in which a industry is dominated by small number of sellers.
Oligopoly harms customers.To break out of such situation, we need to induce competition.
A monopoly exists barriers to entry the large number of buyers and sellers the absence of barriers to entrycollusion among the dominant firms the absence of exclusive government franchises
Oligopoly• Why do oligopolies exist?
– 1) economies of scale – arise because of minimum efficient scale
– Construction companies at the local level– Biotech companies– Multinational corporations– Railroad companies
Function• A monopoly is a market condition in which only one
vendor (usually a large corporation) is in play. There may be other somewhat similar businesses, but a monopoly exists when only one business or individual can provide a product or service.
• In an oligopoly, the product or service may be available from more than one vendor or merchant, but only a few big players dominate the market and make competition very difficult for new entries in the field.
Examples• Examples of monopolies are difficult to produce, as federal
antitrust regulations prohibit monopolistic market conditions in the United States. Regardless of legal issues, though, monopolies do exist, primarily in the utilities market. Electricity, for example, is generally available from only one "electric company" in any given market. Water and cable television are equally exclusive. During the 1990s, Microsoft commanded such a large portion of the computer operating system environment, and demonstrated such a propensity to absorb upstart competitors, that it was believed to be a monopoly as well.
• Examples of oligopolies are considerably more plentiful. The automotive industry, for example, has many competitors but is dominated by General Motors, Ford, Chrysler, Honda, and Toyota.
Similarities• While monopolies and oligopolies are
representative of considerably different market conditions, they do bear some important similarities. Consumers are at a distinct price disadvantage in both conditions, as prices for products are dictated by a single company in a monopoly environment and commanded by only a few select merchants in an oligopoly condition. Selection is similarly limited as products are designed and offered by a very limited consortium in both arrangements.
DifferencesDespite their similarities, there are some distinct differences between monopolies and oligopolies. While a monopoly does severely restrict consumer choices, oligopoly conditions do allow for some competition among the major players. This competition can even induce price wars, as has been demonstrated by fast-food giants, automotive manufacturers and even cola companies. The most significant difference, however, is that oligopolies are a common market condition while monopolies are forbidden under federal regulations.
Restrict monopoly in financial markets, says Rangarajan (16th Oct 2009 )
The tendency of natural monopolies in the financial markets must be restricted. “Natural monopolies are a threat," creating a creative competitive atmosphere in the financial markets would spur growth. - C Rangarajan
He also talked of establishing a relationship between sectoral
regulator and competition. The panel discussion set the stage for The release of a report by CUTS titled, “Competition & Regulation in India, 2007
Features of Monopoly One seller & large number of buyers Monopoly is also an industry Restriction on the entry of new firms No close substitutes Price maker Price discrimination
Features of Oligopoly Few firms Nature of the Product Interdependence of firm Indeterminateness Complex market structure Selling cost
Types of monopoly market Natural MonopolyLegal MonopolyPure MonopolyLimited MonopolyPublic MonopolyPrivate MonopolySimple MonopolyDiscriminating MonopolyBilateral monopolyJoint Monopoly
Types of oligopoly market
DuopolyOligopsonyBilateral oligopolyCartel oligopoly
How do we know?
HOW TO DETERMINE THE PRICE IN OLIGOPOLY MARKET ?
Nature of goodsTechnologyElasticity of demandMarketing strategyPrice of inputs (Factors of production)
How far does the theory of oligopoly match with reality ?
A Case Study
TYPES OF MONOPOLY COMPANIES……………
Is Microsoft a monopoly or oligopoly?
• 1 year ago• Oligopoly. This is because Apple and Linux
provide operating systems in addition to Microsoft.
Oligopoly Models
“Kinked” Demand Curve Cournot (1838) Bertrand (1883) Nash (1950s): Game Theory
In order to create the demand or product In oligopoly market
Buy 1 get 1 free offers
Lucky draw
Discount sales
Customer incentives
Characteristics of Market Structures
Market Structure
Characteristics Monopoly Monopolistic
Competition Oligopoly
Number of firms One Many Few
Barriers to entry High Low High
Market power (control over price
Substantial Some Substantial
Type of product Unique Differentiated Standardized or differentiated
Monopolistic competition Many firms producing similar but differentiated products Relatively free entry and exit Each firm perceives a demand curve reflecting the
relationship between its price the quantity demanded of its own product.
The firm can influence the price by change the quantity it supplies or by differentiating its product from those of its competitors.
The firm’s output and price are in equilibrium when the price the firm charges is consistent with its market share
Prof. Chamberlin
Developed the concept of Monopolistic competition .
What do we see in the 21St Century?
Many big corporations seeking more market share have been following a simple rule.“Don’t build what you can buy.”
WSJ, February13,2006
Part of this zeal to purchase is to fill some of the empty production space created in the building boon of late 90’s…. This will allow for movement to capacity production which is more efficient.
CONCLUSION
