Because of it, the existing firms don’t have to worry about the new firms in the market. But, in a Closed Oligopoly, there is a barrier to the entry of the firms in the industry. A perfect Oligopoly is that situation in which all firms in an industry produce homogenous products.

Interestingly, the Oligopoly Market demand is marked by kinked demand curves. Therefore, oligopolists maximize profits by balancing marginal revenue with the marginal cost of the concerned product. Also, explain the interdependence between the firms’ feature of oligopoly. Explain the ‘free entry and exit of firms’ feature of monopolistic competition. Unlike Duoville’s two-company system, the few companies in Oligotown didn’t need to worry as much about direct competition.

I. Introduction to Market Structures

The mayor of Competeville bragged about the freedom of choice in his town, but the others pointed out that his residents were exhausted by endless competition. Duoville’s mayor spoke of the balance between his two giants, but he admitted that the people feared one misstep could turn the town into a monopoly. The mayor of Oligotown, meanwhile, argued that his town’s stability was unmatched, but he couldn’t deny that innovation had slowed and the people were starting to rebel against the corporate giants. For example, over the last three years, entry level telecom tariffs have increased 340% from Rs 35 to Rs 155. The cost of digital TV recharge has also increased three folds over the last five years.

A café served coffee with artistic foam designs, while another was famous for its live music in the evenings. In a land not so far away, three neighboring towns existed, each with a unique way of managing businesses and competition. Though they shared borders, their economic landscapes were as different as night and day. Is this happening because global companies are apprehensive about India’s economic policy increasingly geared towards protecting domestic oligopolies as part of its aatmanirbhar (self reliance) policies?

In the above-given graph, just below the point corresponding to the kink, there is a discontinuity in the MR curve. Because at the state of equilibrium ON is the level of output and MC intersects the MR curve at this level. Advertisement is the base to make the competition among the sellers more intense.

A monopoly is one firm holding concentrated market power, a duopoly consists of oligopoly examples in india two firms, and an oligopoly is two or more firms. Oligopolies can be created through coordination between companies. More often, though, they arise due to industry consolidation and protectionism, either due to government interference or other factors. The limited number of competitors creates an oligopoly, even if the companies aren’t deliberately colluding with each other.

Monopoly typically refers to a single company producing a product or providing service with no other substitute. This means that this company acts as a dominant force in its offerings. With enough power to ensure that other substituting establishments or institutions do not come close to their price points, services, and brand quality. Such companies stand as a force to reckon within the market structure. Monopolies usually exist to provide ultimate benefits to the consumer and often possess information that no other companies have.

Comparison with Monopolistic Competition and Monopoly

Pepsi was, however, prepared for Coca-Cola to launch in the larger bottle, which became the standard inmost parts of the country, making the price a parity issue between the two brands. The members of an oligopoly change the nature of a free market. In an era where consumers expect flexibility and freedom of choice, such tie-in arrangements raise critical questions about the balance between convenience and consumer rights. The Competition Commission of India (CCI) has taken on the mantle of ensuring a level playing field, striving to foster competition and eliminate anti-competitive practices. The computer technology sector in the technology sector applies as a good example of oligopoly.

Oligopoly: Features and Examples

To know more about the other  examples of the Oligopoly Market, visit Vedantu’s website or app where you can get free resources on this topic and much more. Duoville’s inhabitants enjoyed occasional price cuts and new innovations, but deep down, they knew that if one of these companies ever failed, they’d lose their power to choose. In a way, they lived under the shadow of an unspoken truce between the two giants. Drawing from China’s experience, it’s evident that technology plays a pivotal role in propelling any nation to the forefront of manufacturing. However, adopting a more protectionist stance in the Indian market could potentially impede efficient manufacturing processes and hinder job creation.

• However, adopting a more protectionist stance in the Indian market could potentially impede efficient manufacturing processes and hinder job creation.
• While they can’t dictate price and availability like a monopoly can, they often turn into friendly competitors, since it is in all the members’ interest to maintain a stable market and profitable prices.
• The price and output decision of Jio may significantly impact the price and output decision of other networks like Vi (Vodafone Idea) and Airtel.
• They have the largest market shares and can often merge their services and prices to offer similar advantages for the consumers without wiping each other out, trying to outshine one another.
• Unlike Duoville’s two-company system, the few companies in Oligotown didn’t need to worry as much about direct competition.
• The concentration ratio measures the market share of the largest firms in an industry and is used to detect an oligopoly.

Monopolistic Competition

More often than not, companies tend to collude with their competitors instead of competing with them to ensure that an overall balance in the business remains. On the other hand, a Non-Collusive Oligopoly is a market in which the firms act independently. They compete with each other and determine independently the price of their products.

As such, consumers buy goods from other firms at a lower price. Likewise, when one firm lowers its price, other firms also decrease their prices so that they do not lose customers. This was the hallmark of a duopoly—only two major competitors controlling the market.

There are some exceptions, however, like Jio entering the industry of mobile networks and causing a disruption in the market. For example, there are only a few car producers in the Indian auto market. Toyota, Maruti Suzuki, Honda, Audi and BMW are some examples of well-known car brands. Oligopolies can become unstable when new firms attempt to gain entry. Of course the high cost of acquiring plant and equipment acts as a barrier to entry. It is also costly to enter an industry dominated by a small number of known trade names.

• Sellers in an oligopoly are dependent on each other because the decision of one firm affects the entire industry.
• Oligopolistic markets, thus, give rise to kinked demand curves.
• Explain the ‘free entry and exit of firms’ feature of monopolistic competition.
• However, regulatory bodies like the CCI have played a crucial role in curbing anti-competitive practices, striving to create a more level playing field.
• Interestingly, the Oligopoly Market demand is marked by kinked demand curves.

The Evolution Of India’s Market Structure: Oligopoly On The Horizon

In conclusion, entering into an oligopoly market is restricted and in order to capture a higher market share, the firm tends to collaborate and form cartels. In this form of market, the interdependency is high due to which the price and output of a firm rely on the competing firm in the market. A market structure dominated by a small number of large firms, selling either identical or differentiated products, and significant barriers to entry into the industry. One of the contentious issues in the industry is Resale Price Maintenance (RPM). OEMs set maximum prices for distributors and dealers, ensuring uniform pricing across all dealerships. However, this practice, resembling a cartel, stifles price competition both within and between brands, resulting in higher costs for consumers.

In the long run, firms in an oligopoly tend to reach an equilibrium where prices are stable, and firms continuously adjust their strategies to maintain or grow their market share. This stability occurs due to the kinked demand curve theory, where companies expect their competitors to match price cuts, but not price hikes, leading to relatively stable pricing. Cartels- Oligopolies also have a formation of cartels to avoid price competition, where competing firms can form a group and gain more market share to beat other market entrants. For example, Vodafone and Idea became Vi to compete against Jio and Airtel. Oligopolies that follow a price leader do not engage in price competition, but they still contest for market share with a variety of forms of non-price competition. Pepsi and Coke each spend billions on TV ads designed to entice the consumer to switch cola brands.

This leaves them vulnerable to pricing strategies that are heavily influenced by the data collected by OEMs. The investigation found that car manufacturers restricted spare parts sales in the open market, limiting consumer choice and leading to inflated prices. Further, there was complete restriction on availability of technological information, diagnostic tools and software programs required for servicing and repairing the automobiles to independent repair shops.