![]() Kinked Demand Curveįirms in an oligopoly market focus on non-price competition and less innovation but ensure their brands are uniquely identifiable. Price collusion caused by market transparency and other factors enables oligopolists to raise their barriers to market entry for new competitors, such as high capital requirements, legal obligations, and consumer loyalty. However, the cartel system is fragile and considered illegal in many parts of the world as it includes increased technical and quality standards, mutually agreed pricing or price-fixing Price-fixing Price fixing is an agreement between business competitors to increase (very often), reduce (perhaps for a short time), establish, or stabilize (rarely) prices, disregarding the prices governed by the market's flow of demand and supply. The group that colludes is referred to as a cartel Cartel A cartel is a group of producers of goods or suppliers of services formed through an agreement amongst themselves to regulate the supply of goods or services with the basic intent to illegally regulate the prices or restrict competition regarding the said goods or services. In doing so, they reduce production and increase prices, a phenomenon called collusion. Also, they rely on free-market forces to earn higher profits than a competitive market. Marketers highlight the distinguishing features in the product commonly through packaging or a good design, which helps communicate the benefitting factors to the shoppers. read more, market demand, and product differentiation Product Differentiation Product differentiation refers to making a product look attractive and different from other products in the same class. Instead, they collaborate on various fronts, such as economies of scale Economies Of Scale Economies of scale are the cost advantage a business achieves due to large-scale production and higher efficiency. Oligopolists do not compete with each other. Businesses in such a market collaborate to dominate the rest of the players and maximize joint revenue. ![]() ![]() ![]() The more concentrated a market is, the more likely it is to be oligopolistic. The presence of a small number of companies in an oligopoly market structure makes it highly concentrated. You are free to use this image on your website, templates, etc., Please provide us with an attribution link How to Provide Attribution? Article Link to be Hyperlinked In an oligopoly, a few dominant brands offer most of the products and services and make significant decisions on behalf of the rest. Here, they focus on each other and try to exceed customer expectations in every possible way. In the credit card industry, for example, Visa and MasterCard have a duopoly. Such companies have complete control of the market, earning high profits and gains in a specific sector or service. When two major players dominate a sector, the market becomes a duopoly Duopoly When there are two market leaders in any industry or service, this is referred to as a duopoly. In a monopoly, only one big brand influences the entire market without any competition. The factors that determine a market structure include the number of businesses, control over prices, and barriers to market entry. It encourages existing brands to improve product quality and originality by instilling a sense of rivalry. They do so through collusion that results in higher prices and fewer production or product choices for customers. Oligopolists offer comparable products or services, so they control prices rather than the market. read more, monopoly, and monopolistic competition. It is assumed that all of the sellers sell identical or homogenous products. Furthermore, no restrictions apply in such markets, and there is no direct competition. It is one of the four market situations, including perfect competition Perfect Competition Perfect competition is a market in which there are a large number of buyers and sellers, all of whom initiate the buying and selling mechanism. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. An oligopoly in economics refers to a market structure comprising multiple big companies that dominate a particular sector through restrictive trade practices, such as collusion and market sharing.
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