Competition in the US health insurance industry3 3. Analysis of the US health insurance market structure7 4.
Oligopoly What it is: An oligopoly is an economic market whereby a small number of companies or countries generate and control the entire supply of a good or service. How it works Example: But if Company ABC and Company decide to follow Company XYZ's lead and raise their prices, the three companies can essentially control the entire carrot market through their power to set prices.
In a truly competitive market, the three companies would not have this luxury--they would probably have to either lower their prices or differentiate their products to stay in business.
Companies in an oligopoly are keenly interested in what the other members of the oligopoly will do next. The goal of a company involved in an oligopoly is to increase profits by attempting to monopolize the market by finding and maintaining competitive advantages.
Economies of scale often lead to oligopoly-like conditions because they discourage new competitors from entering a market. Consider how capital intensive it is to enter the airline business or the soda business industries are commonly thought of as oligopolies.
And because there is so little of the market available to competitors, new entrants to an oligopoly rarely succeed. Although uncommon, oligopolies can quickly turn into cartels, which are groups of companies that agree to influence prices by controlling the production and sale of a good or service one of the world's most well-known cartels is the Organization of Petroleum Exporting Countries--OPEC.
The companies essentially collude to control supply and prices. This is why prices in oligopolistic industries are usually higher than markets that allow greater competition.
Oligopolies and cartels are hard to maintain in the long term. Federal antitrust laws, most notably the Sherman Act, make cartels and collusive activity illegal in the United States. Also, disagreements within cartels regarding output may cause a break up of the group.
In addition, consumers often become sensitive to the increased prices.Oligopoly in the U.S. Economy Introduction Oligopoly is defined as a market structure in which there are a few major firms dominating the market in an industry.
One of the defining factors is that each firm explicitly feeds off of the competitors' moves and their potential responses in regard to setting prices, launching new products, etc.
Oligopoly is a market structure dominated by only a few large profitable firms. In economics, it usually uses the four-firm market ratio (at least four firms control more than 40% of the market). However, each firm in an oligopoly has an incentive to produce more and grab a bigger share of the overall market; when firms start behaving in this way, the market outcome in terms of prices and quantity can be similar to that of a highly competitive market.
Oligopoly, market situation in which each of a few producers affects but does not control the market. Each producer must consider the effect of a price change on the actions of the other producers.
A cut in price by one may lead to an equal reduction by the others, with the result that each firm will retain approximately the same share of the market as before but at a lower profit margin. Oligopoly is the middle ground between monopoly and capitalism.
An oligopoly is a small group of businesses, two or more, that control the market for a certain product or service. An oligopoly is a small group of businesses, two or more, that control the market for a certain product or service. Oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence.