1 OLYGOPOLISTIC MARKET STRUCTURE What is an Olygopoly?

An Olygopoly situation arises when the market is concentrated among a few key players. Usually the top four firm concentration ratio is used in quantitative analysis.

Characteristics of an Oligopoly

Oligopolistic firms compete based on their non price aspects such as customer focus. ★ Ability to set prices -Most oligopolies are price setters due to their dominance in the market. technical advancements. The organisation depends on it’s ability to differentiate it’s products from its oligopolistic rivals ★ Non price competition .2 ★ Few firms -The most distinct feature of oligopolies is the small number of dominant firms in the industry ★ High entry barriers -In the case of oligopolies barriers such as high fixed cost. who have a major stake in the market. distributor agreements and use of complex technology are commonly prevalent to discourage new firms from entering the industry.. ★ Interdependence . CARTELS What are cartels? Since oligopolies are made up of a few large organizations.Usually oligopoly firms have a close relationship with each other. ★ Differentiation -Product differentiation is a key feature among oligopolistic firms. promotional activities. new product development. intellectual property. customer loyalty. the actions of each firm can lead to a large impact on the .

This leads to the oligopoly deciding on the price and output. This form of a collision is called a cartel. A notable example for such an illegal cartel was the airline cargo cartel between 11 major airlines which fixed a standard COLLUSIVE OLIGOPOLIES .3 market. The best example of a cartel is OPEC ( Organization of Petroleum Exporting Countires). Hence these large firms collude together to form as a group to face the market. ● To increase market power ● To avoid price wars ● To minimise threat of new entrants ● Ability to maintain high prices ● Protects sales volume However it should be noted that Cartels are banned in some countries such as the United States. Reasons for companies joining cartels. OPEC member hold regular meetings to decide on the amounts of petroleum to be produced by each memeber. In such cases secret agreements may be sorted.

The mobile network industry shows an oligopoly market due to the few large companies. .4 EXAMPLES FOR OLIGOPOLIES SRI LANKA . Hutch and Airtel. Etisalat. Mobitel. Dialog.

Sainsbury’s and Morrisons UNITED STATED ● .5 UNITED KINGDOM ● ● Banking industry dominated by Barclays. Lloyds TSB. Halifax.4% of the grocery industry being shared by Tesco. Asda. HSBC and Natwest 74.