Transcript
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
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