OLIGOPOLY MARKETM.MANJUNATH

14051026

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’

df KINKED 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 it’s 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 rise

• KD2 = less elastic portion, when rival firms react with a price reduction.

• Kink is at point K.

D1

D2

K

A

B

MRQuantity

O

MC1

MC2P

Q

ST

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