Oligopoly Market of Soft Drink Free Essay Example

The sellers in the oligopoly market sell differentiated or homogeneous products. As the number of sellers in this market is less, the price and output decision of oligopoly examples in india one seller impacts the price and output decision of other sellers in the market. In other words, the interdependence among the sellers of a commodity is high.

The telecom services which are sold by the telecommunication service providers in the KSA are differentiated (as each telecom company offer different packages to customers). Oligopolistic markets achieve maturity when players in the market learn that they realise more profits through joint efforts designed to maximize price control by minimizing the influence of competition. However, the stability and effectiveness of a cartel are limited, and its members tend to break through the alliance to gain short-term benefits.

A Detailed Note on Oligopoly

Patents, requirement of large capital, control over crucial raw materials, etc, are some of the reasons, which prevent new firms from entering into industry. Only those firms enter into the industry which is able to cross these barriers. There exists severe competition among different firms and each firm try to manipulate both prices and volume of production to outsmart each other. For example, the market for automobiles in India is an oligopolist structure as there are only few producers of automobiles. Sellers have some control over the price, but at the same time there is an intense rivalry or competition in the popular sense to increase their individual market shares.

So, price and output decisions of a particular firm directly influence the competing firms. Instead of independent price and output strategy, oligopoly firms prefer group decisions that will protect the interest of all the firms. Group Behaviour means that firms tend to behave as if they were a single firm even though individually they retain their independence. The main reason for few firms under oligopoly is the barriers, which prevent entry of new firms into the industry.

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However, as far as the cola flavored fizzy drinks are concerned there are only two brands, Coke and Pepsi. Under such a situation economists would say there would be intense competition. Unless, the two parties collaborate with each other, which is certainly not the case in the cola market worldwide or in India. The new oligopoly is made up of multinational corporations that have chosen specific product or service categories to dominate. In each category, over time, only two to four major players prosper. Starting a new company in that market segment is difficult, and the few that do succeed are often gobbled up or run out of business by the oligopolies.

• While this sometimes leads to actual product improvement, it can also lead to the production of images rather than truly different products.
• When we talk about soft drink market in India, the two major names which come in our mind are PepsiCo India and Coca Cola India Ltd.
• It forms with firm collusion that is why it is called a collusive oligopoly.
• The other three are perfect competition, monopoly, and monopolistic competition.

So they decide to search for another company that offers internet service to their home. Their cable company, Cable company A, is one of only two cable internet providers in the area. A new tech company is offering satellite internet, but that is expensive and buggy. If this seems familiar, then that’s because internet service is part of a telecommunications oligopoly. An oligopoly is when there are a very select few companies in a given market sector and every decision each company makes has dramatic effects on the other companies and on the market itself.

Best Examples Of Oligopoly In 2023

In economics, oligopoly can be defined as a market structure wherein a particular industry is dominated by a few large sellers (oligopolists). As, the data displayed in the above table, in India 53 out of 94 selected industries, i.e., in about 60% industries, 4 to 10 firms have a 75% or more market share which provides a concentration ratio of 0.53 or above. Open competition is defined by a free market in which there are, or can be, many competitors. The industry is not dominated or controlled by just a few large organizations. While other businesses could enter an oligopoly, it is more likely that investors would seek to enter a niche with open competition rather than trying to break into a market that is already controlled by a few major players. A monopoly is exclusive control of the market by one business because there is no other group selling the product or offering the service.

Warner Music Group employs more than 3,500 people and has an annual revenue of over $4.4 billion. Apple and Samsung not only lead the market in terms of sales but also in user satisfaction. According to the American customer satisfaction index, all Apple iPhone and Samsung Galaxy models rank the highest. The smartphone penetration rate has continuously risen over the past decade. Today, the annual revenue from smartphone sales has reached over $70 billion.

Game theory models

When one company sets a price, others will respond in fashion to keep their customers buying. For example, if an airline cuts ticket prices, other players typically follow suit. But, because the level of competition is still relatively low compared to a free market with many players, prices are usually higher in an oligopoly than they would be in perfect competition. If the firms produce a differentiated product, like automobiles, the industry is called differentiated or imperfect oligopoly. Under oligopoly, there is complete interdependence among different firms.

The third characteristic of an oligopoly is that companies have to advertise their products. In a monopoly, people know there is only one company for a certain type of product, so there is no advertising required. In a duopoly, advertising focuses on the different features of a company’s products. In an oligopoly, in addition to advertising the different features, companies also have to advertise themselves so the general public knows who they are. The more a company advertises its products, the more it will be ahead of their competition.