MANAGERIAL ECONOMIC’S : MANAGERIAL ECONOMIC’S MONOPOLY & OLIGOPOLY : MONOPOLY & OLIGOPOLY PRESENTED BY - : PRESENTED BY - MohammedDanish
Purva Pawaskar PRESENTED BY : PRESENTED BY MohammedDanish
Purva Pawaskar Slide 5: Classification of market on basis of
Competition Market Types of market : Types of market Perfect competition
Oligopoly Slide 7: A market structure in which only one Producer
or seller exists for a Product that has no close
substitutes Monopoly Slide 8: Oligopoly According to, In economics ,a situation in which few companies control the major part of a particular market ……… Slide 9: Oligopoly Oligopoly 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 : A monopoly exists barriers to entry
the large number of buyers and sellers
the absence of barriers to entry
collusion among the dominant firms
the absence of exclusive government
franchises Oligopoly : Oligopoly Why do oligopolies exist?
1) economies of scale – arise because of minimum efficient scale
Construction companies at the local level
Railroad companies Function : 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 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 : 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. Differences : Differences Despite 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 ) : 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
- 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 : 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 discrimination Features of Oligopoly : Features of Oligopoly Few firms
Nature of the Product
Interdependence of firm
Complex market structure
Selling cost Types of monopoly market : Types of monopoly market Natural Monopoly
Joint Monopoly Types of oligopoly market : Types of oligopoly market Duopoly
Cartel oligopoly How do we know? : How do we know? Slide 22: HOW TO DETERMINE THE PRICE IN OLIGOPOLY MARKET ? Nature of goods
Elasticity of demand
Price of inputs (Factors of production) Slide 23: How far does the theory of oligopoly match with reality ? A Case Study Slide 25: TYPES OF MONOPOLY COMPANIES…………… Slide 26: Is Microsoft a monopoly or oligopoly? Slide 27: 1 year ago
Oligopoly. This is because Apple and Linux provide operating systems in addition to Microsoft. Oligopoly Models : Oligopoly Models “Kinked” Demand Curve
Nash (1950s): Game Theory In order to create the demand or product In oligopoly market : In order to create the demand or product In oligopoly market Buy 1 get 1 free offers
Customer incentives Characteristics of Market Structures : Characteristics of Market Structures Monopolistic competition : 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 : Prof. Chamberlin Developed the concept of Monopolistic competition . What do we see in the 21St Century? : 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.”
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. Slide 34: CONCLUSION