Sources of Oligopoly Assignment Help

Market Structures - Sources of Oligopoly

Sources of Oligopoly

1.       CMIE Industry: Market Size and Shares, Aug. 2000. Figures are percentage of sales for the year 1998-1999.

2.       O.RG, GFK, May, 2000.

3.       ORG, GFK May, 1999.

For example, a price decrease from P1 to P2 will result in movement along demand curve dd and increase sales from Q1 to Q2 as customers take advantage of the lower price and abandon other suppliers. However, if other firms match price cut, increase in sales will be less since other firms are selling at the same price, any additional sales must result from increased demand for the product. Thus, the effect of price reduction is a movement down the relatively less elastic demand curve, DD. Now the price reduction from P1 to P2 increases sales only to Q3.

Thus, the response of the competitors has significant impact on the managerial decisions in an oligopoly market. The oligopolists deal with interdependence in different ways, depending on the specific nature of the industry. In some cases, most actions are ignored, while in other cases price war may occur. Many factors such as industry maturity, nature of the product, and methods of doing business can affect the ways firms respond to actions of rivals. Therefore, there is no single model of oligopoly. We will examine three important models. 

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