OLIGOPOLY

OLIGOPOLY BY-VIPRA AGGARWALNITIN TYAGI

WHAT IS IT.?? Oligopoly is the market where there are few sellers in te market and large no of buyers.Selling homogeneous products is PURE OLIGOPOLYSelling differentiated products is DIFERENTITED OLIGOPOLYEXAMPLES OF -OLIGOPOLY MARKET- automobiles, airlines etc.PURE OLIGOPOLY- Aluminiums, ChemicalsDIFFERENTIATED OLIGOPOLY- Sft drinks, CigarettesFEATURES Small no of sellers- Sellers are very few in this market and their market share is very large so they can individually influence the market price.

Interdependence of decision making- firms watch the pricing strategies, reaction and action of rival firms then they take decisions for their firms.Indeterminate demand curve- Demand curve is not determinate here. Uncertanity of reactions of rivals leads to change in demand curve.BARRIERSNew firms cant enter so easily in the market.Huge investment requiredStrong consumer loyaltyEconomies of scalePatents, trademarks,licencing leads to artificial barriers.An oligopolist firm can increase its sales both by advertising or by increasing their quality.COLLUSIVE OLIGOPOLYCollusion is of two types-CARTELSPRICE LEADERSHIPCARTELSThere is an agreement between the firms and irms jointly fix a price and output policy through agreement.The individual firms surrender their price and output decisions to board and this board determines the output quota for the firms.Market demand curve is known to cartelCost curve is also known to cartelCartel aims at joint profit maximisation

PRICE LEADERSHIPIt is imperfect collusion in which all firms follow the lead of one big firm.Price is determined by a firm and all other firms follow it.There re two firmsMarket demand curve is known to both the firms.They have identical MR curves.

CONCLUSION In Oligopolistic market there is no product differentiaton, no advertising expenditure and product produced by one firm is close substtute of other. THANKYOU!