Question
Explain five features of an oligopolistic market.
Answer
i. Firms are interdependent in decision making /firms keenly observe each other's actions / a decision hence acting in a way that triggers (counter) reactions (from other firms).
ii. Firms deal in products that are homogeneous/similar/the products are (core) substitutes (of each other) but (only) differentiated in terms (of aspects) like color, packaging and shapes /pricing /branding.
iii. Firms may engage in non-price competition /the firms under oligopoly may avoid price wars hence only compete via other means like (aggressive) advertising/after sales services /market segmentation/fixing quotas.
iv. Unpredictability /uncertainty of behavior since firms (under oligopoly) keep reacting to market changes differently /depending on the actions taken by other firms (within the market /firms may be taken by surprise.
v. The market is made up of a few/large) firms. Since such firms (operating under oligopoly) tend to have a large capital outlay /make (extensive) use of modern technology in their production activities /control substantial share of the market.
vi. There are limiting factors to entry - such as large capital investment required (to be a player in this market),the level of technology involved(may keep off possible entrants into the market )/intimidation /economic of scale /collision/cartels/accepts examples of limiting factors as qualifications.
vii. Firms may engaged in price wars/ price rivalry/cut-throat competition -which may lead to survival /of collapse of (some) firms.
viii. It may lead to rigidity /kinked demand-occasioned by fear of other firms reactions/ if a firm tries to sell at a price above the kink no other firm may follow but if below all other firms may follow suit.
ix. There may be price leadership - where the dominant firm dictates market price /rules the market.
ii. Firms deal in products that are homogeneous/similar/the products are (core) substitutes (of each other) but (only) differentiated in terms (of aspects) like color, packaging and shapes /pricing /branding.
iii. Firms may engage in non-price competition /the firms under oligopoly may avoid price wars hence only compete via other means like (aggressive) advertising/after sales services /market segmentation/fixing quotas.
iv. Unpredictability /uncertainty of behavior since firms (under oligopoly) keep reacting to market changes differently /depending on the actions taken by other firms (within the market /firms may be taken by surprise.
v. The market is made up of a few/large) firms. Since such firms (operating under oligopoly) tend to have a large capital outlay /make (extensive) use of modern technology in their production activities /control substantial share of the market.
vi. There are limiting factors to entry - such as large capital investment required (to be a player in this market),the level of technology involved(may keep off possible entrants into the market )/intimidation /economic of scale /collision/cartels/accepts examples of limiting factors as qualifications.
vii. Firms may engaged in price wars/ price rivalry/cut-throat competition -which may lead to survival /of collapse of (some) firms.
viii. It may lead to rigidity /kinked demand-occasioned by fear of other firms reactions/ if a firm tries to sell at a price above the kink no other firm may follow but if below all other firms may follow suit.
ix. There may be price leadership - where the dominant firm dictates market price /rules the market.
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