Oligopoly Market Conditions

Oligopoly Market ConditionsOligopoly is such a foodstuff situation wherein the cast of sellers is a couple of(prenominal) and the poesy of buyer ar m some(prenominal)(prenominal). That is unlike the monopolistic competitor the seller argon non one but at to the lowest degree cardinal and could range up to ten. This is because of the following reasons.Heavy input cost of producing the return making it difficult for every firm to make investments. entryway barriers made by the bigger firms in the form of government regulations, set competition, brand setting and early(a) pressure tactics.The method of production requires distinction which is not available with former(a) firms.Product enjoys monopoly in the market. so the above mentioned few reasons gutter break the cause of set up of an oligopoly market. hail of sellers and buyers in oligopolyNow Oligopoly, as mentioned above can have from two to tens suppliers, rather than one in the case of monopoly market. Thus they together become the equipment casualty setters instead of determine takers. Any rise in price will benefit the rise in sales of other club products that may be sympathetic or differentiated. Reason being the other companies wont follow in rising their product prices as they would be expecting an increase in sales.On the other side, any f each in price will not help gain many customers, as the other companies will respond in a similar frame and the result will be price war. Thus declining the price aim would not help gain as many customers as expected. harm Equilibrium in OligopolyAn equilibrium condition is when the prices remain unstable and the proviso remains same. To increase the demand of the products and meet the competition of other products in the market, these firms indulge in bowed down(p) advertising running games. Through advertisements they teach the customers just about the new feature that is added in their product and various other benefits of apply thei r product. This sometimes results in putting stains on the other companys product in indirect words.Examples of OligopolyA number of examples of Oligopoly market situation can be figured out around us. These are explained as follows.PepsiCo and Coca genus Cola Co. are the two market leader and sellers of soft drinks around the world. Thus two numbers of firms selling to large number of buyers makes it an Oligopoly market. Further much these companies are always making heavy investments on advertisements around the globe. Some of the advertisements may be meant to harm the brand image of other. The result in some other advertisement in response. Sometimes these matters are even taken to courts for settlement.Boeing and Airbus are another two large companies that makes planes to foster the need of various countries. once again these are two companies, which are the sign of Oligopoly market conditions. These companies although do not make much advertisements, but offers latest techn iques at competitive prices by making product differentiation and attracting customers around the globe.OPEC includes a few numbers of sellers of petroleum product throughout the world. As the number of seller is not two but not many either. The numbers of buyers are large, including countries in Asia, Africa, Europe etc.Diagrammatic representation of OligopolyAs we know that in the Oligopoly is a market where in the number of seller are more than two but not higher in number, whereas the buyers are many. tho the price rise results in benefitting the other companys product sales. And on the other hand the price f all results in attracting only a few customers. This type of market conditions can be displayed as follows.From the above plot its clear that this diagram is very similar to monopoly market situation. But the end is this type of condition remains for a definite price period. That is if any firm try to raise its prices from Pc to Po the result would be benefit to other fi rms. Whereas if a firm try to reduce its product prices than that would not foster him more customers than expected. The result would be affecting the turn a profit margins.Thus a Cooperative Oligopoly price level is administered where in all the companies agree to follow a minimum price levels to earn ripe(p) dinero. Any displacement from the agreed price would affect the changer or so called the Cheater, either by fall in demand or fall in profits. Thus a Nash Equilibrium point can be accepted by all the companies in the Oligopoly where in all the companies earn good profits at the present output and price levels.Features of OligopolyNow we can conclude the features of the Oligopoly market conditions. These are as follows.few producers or sellers and high numbers of buyers.Product differentiation is up to some level or no product differentiation.The firms enjoy ordinary profits in normal market conditions.The firms depend on advertisements, quality arguing and generally accep ted by the group of firms.Economies of scale will exist, as heavy investment and improved technology is needed to get similar quality output at the competitive costs.New firms cannot enter the market, as the old firms create a barrier through government restrictions, heavy investments, pressure techniques like takeover of the uprising company.Swift action is taken on the change in price level and defaming advertising campaign by according price change and responsive advertisements.ConclusionIn the nutshell we can say that the Oligopoly market situation is very similar to Monopoly market situation but with more than one number of seller up to limit extent. The pricing is done by proper agreement amidst the firms. The product differentiation may or may not present. The firms glide by heavy on the advertising campaign and keep a obstruct look at the advertising of other companies and response accordingly. The firms earn normal profits but input barriers on the new entrants.