Monopolistic competition   Perfect competition   Oligopoly   Monopoly Market structures and efficiency    Different types market power   Economicstutor..com.au

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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix


oligopoly


An oligopoly occurs when a relatively small number of businesses dominate the market and collectively exercise market power by restricting supply and/or raising the price.  In markets with an oligopolistic market structure there are typically few buyers and sellers, there are often barriers to entry and exit and there is more likely to exist imperfect information such that the suppliers possess significantly more information about products than the buyers do.  Examples of oligopoly in Australia include the petroleum, banking, airline, supermarket and mining industries, where a relatively small number of businesses dominate each market.  


When only two businesses dominate a market, this is referred to as a duopoly, a special type of oligopoly.  In Australia, Coles and Woolworths have an effective duopoly in the supermarket industry and Virgin and Qantas have an effective duopoly in the airline industry. The presence of several much smaller operators in each of these markets does not preclude the operation of an effective duopoly, since the smaller operators have no effect on reducing the market power, or dominance, of the two main operators.  In oligopolistic markets, businesses will tend to avoid engaging in price competition, and instead seek to differentiate their products through marketing and advertising.  Businesses in these types of markets will also seek to create additional ‘artificial’ barriers to entry in order to preserve their market dominance (i.e. market power). This includes strategies such as multi-branding, exclusive dealing or cartel conduct.

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