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    9 views6 pages

    Untitled

    Uploaded by

    Karan Singh
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    © All Rights Reserved
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    of 6
    PRICE AND OUTPUT DETERMINATION UNDER OLIGOPOLY © 1. Introduction Oligopoly isa market situation with only a few large sellers. The word oligopoly is derived from ee ‘Oligoi” means few’ and ‘poly’ means ‘control’. Thus, oligopoly is a market situation a few large firms sell either homogenous or differentiated products. In India, there are several Process 0( oligopoly lite Aine, (Ar Indi, Indian Airlines, Jet Airways, Sahara Airways), Automobile P eee (Maruti, Hindustan, Tata, Mahendra and Mahendra, Ceilo). There is great deal of interdependence among them. Each oligopolist formulates its policies regarding price or output with an eye to their effect on its rivals. A firm's price or output influences the sales and profits of competitors. Because of their interdependence oligopolists face a situation in which the optimal decision of one firm depends on what other firms decide to do, and in which there is opportunity for both conflict and co-operation. The special case of a market dominated by two firms is called a ‘Duopoly*. Mummy © Inthe words of PC. Dooley, “An oligopoly is a market of only a few sellers, offering either ‘homogenous or differentiated products. There are so few sellers that they recognise their mutual dependence”. © In the words of Mansfield, “Oligopoly is a market structure characterized by a small number of firms and a great deal of interdependence.” © According to Grinols, “An oligopoly is a market situation in which each of a small number of interdependent, competing producers influences but does not control the market". © Inthe McConnel, “Oligopoly isa market situation in which number offirmsin an industry is, so small that each must consider the reactions of rivals in formulating its price policy.” 2. Features or characteristics of Oligopoly The following are the main features or characteristics of oligopoly: (1) Few Sellers and Many Buyerv: Oligopoly is a market structure in which few firms dominate the industry. For example in India four companies Maruti, Hyundai, Cielo and Tata, produce 90 percent of small cars. The products sold by oligopolist firms can either be homogenous or differentiated. The firms can influence the price and output by their actions. The number of buyers in oligopoly will be quite large. 410 Managerial Economics (2) Homogenous either homogenous or ifewrteegrentated Product: Firms in oligopolistic industry may produce stelthe industry is called a pure eee the firms produce ahomogenous product ike cementor automobiles, the industy is called auie

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