Oligopoly market

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Transcript of Oligopoly market

OLIGOPOLY MARKET

OLIGOPOLY MARKETM.MANJUNATH14051026

IN the term Oligopoly has been derived from Greek words OLIGI means few and POLEIN means seller.A few dominant sellers sell DIFFERENTIATED (OR) HOMOGENOUS Products under continuous Rivals action .Oligopoly looks Similar to other markets forms as there can be many sellers ( like in monopolistic competition) but a few very lager sellers dominate the market. What is Oligopoly ?What is Oligopoly ?

Few Sellers:- Small no: of large firms compete.. Entry Barriers :- No legal barriers ; only economic in nature .. Huge Investment is requirements . Strong consumer loyalty for existing brands .

Features of OLIGOPOLY

KINKED DEMAND CURVE .PRICING UNDER COLLUSION PRICING UNDER PRICE LEADERSHIP 3 Kinds of Pricing in OLIGOPOLY MARKET

dfKINKED DEMAND CURVE PAUL SWEEZY

(1910-2004)

If a firm decrease price , others will also do the same so, The firm initially faces a highly elastic demand curve.A price reduction will gave some gains to the firm initially, but due to similar reaction by rivals, this increase in demand will not give sustained.If a firm increases its price, others will not follow. Firm will lose large no:of its customers to rivals due to substitution effect. Assumptions of Kinked Demand

Kinked Demand Curve(price and output determination)Discontinuity in AR (D1KD2) creates discontinuity in the MR curve. At the kink (K), MR is constant between point A and B. Producer will produce OQ, whether it is operating on MC1 or MC2, since the profit maximizing conditions are being fulfilled at points S as well as T. If MC fluctuates between A and B, the firm will neither change its output nor its price. It will change its output and price only if MC moves above A or below B. D1K = highly elastic portion of the demand curve when rival firms do not react to price riseKD2 = less elastic portion, when rival firms react with a price reduction.Kink is at point K.

D1D2KABMRQuantityOMC1MC2

PQST

Price, Revenue, Cost

Collusion is an agreement, usually secretive, which occurs between two (or) more persons to deceive , mislead , (or) defraud others of their legal rights IT can involve Wage fixing between the colluding parties . COLLUSION

Uniform Prices A penalty for Price discounts.Advance notice of price changes Information Exchange FEATURS OF COLLUSION

Leader fix the prices for entire industries.AS a result of price war it emerged as winner Agreement among various firms with regard to price Formal or Informal . PRICE LEADERSHIP

Price leadership of Dominant firm major supply .

Barometrice:- old experiment firm

Aggressive :- Dominant firm to eliminate rivals. TYPES OF PRICE LEADERSHIP

Price Leadership in Indian Cement Companys

EXPERIENCED PICKLE Com in IND