Nowadays, you can find different oligopolies in various industries. You can see the examples of oligopolies in your everyday life: platforms you use for communication, operating systems of the smartphones or laptops you buy, search engines you know. Now you can easily distinguish this market structure from others. Last Updated: If you are interested in "What is Oligopoly: Basics" you might be interested in our bulk email service. Your password must be between 8 and 48 characters long, contain at least one uppercase letter, one lowercase letter, and a number.
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Types of Antitrust Violations. Table of Contents Expand. What Is an Oligopoly? Understanding Oligopolies. Conditions That Enable Oligopolies. Why Are Oligopolies Stable? The Prisoner's Dilemma. Special Considerations. Oligopoly FAQs. Economic, legal, and technological factors can contribute to the formation and maintenance, or dissolution, of oligopolies. The major difficulty that oligopolies face is the prisoner's dilemma that each member faces, which encourages each member to cheat. Government policy can discourage or encourage oligopolistic behavior, and firms in mixed economies often seek government blessing for ways to limit competition.
What Is an Example of a Current Oligopoly? Is the U. Airline Industry an Oligopoly? In the United States and many other countries, these arrangements generally are illegal. Companies in an oligopoly may take similar actions even if they do not formally agree to form a cartel. For example, the major fuel manufacturers might each raise gas prices during Christmas, Thanksgiving, Memorial Day weekend or other peak travel periods.
One of the advantages of an oligopoly is that companies within them compete for customers through advertising. These campaigns save consumers time and money in searching for and learning about products and services. Advertising can spur innovation, technological advances and improved products and services. This reduces the consumer surplus available, reducing the welfare of individuals. This can often be highly regressive, if the impact of increased prices, such as with the Big Six Gas Suppliers, has a disproportionate impact on the less well off.
Furthermore, because firms are working together, with internal quotas to divide up sales, there is less need to compete, resulting in less dynamic efficiency.
This results in less innovation, and thus little improvement in the quality of products available to individuals. However, collusion between firms can often derive benefits for consumers. This is a case in which firms are technically engaging in tacit collusion, but which may also result in driving down of prices as firms seek to match improvements in cost efficiencies made by other firms.
This is also true with products such as mobile phone contracts where it is easy to compare prices. Collusion in an oligopoly can hugely benefit firms, which can have beneficial consequences for society. For instance, collusion between coffee growers allows small firms to push for fairer prices against more dominant monopsonistic corporations such as Starbucks.
Furthermore, because these producer cooperatives like Fairtrade are often based overwhelmingly in less developed regions, this can also be useful in helping to alleviate extreme poverty. Furthermore, collusion allows for firms to lower the costs of competition, that can then be passed onto consumers. Because oligopolies exist in highly concentrated markets dominated by a few firms, there is often a huge degree of branding and differentiation that needs to take place in order for firms to stand out, e.
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