MANAGERIAL ECONOMICS

OLIGOPOLY & BARRIERS TO ENTRY .MONOPOLISTIC COMPETITION.

PRESENTED BY Ali Zain Raza Mavra Pervaiz Faisal Arshad Sehrish Qadir Irum Rabeel Aasfar Javed .

WHAT ARE MARKETS? A market is where buyers and sellers: ´ meet to exchange goods and services ´ usually in exchange for money The market may be in one specific place .

ESSENTIALS OF MARKET Commodity for transaction Network of buyers & sellers Competition between buyers & sellers A place or a situation for transaction .

TYPES OF MARKET PERFECT COMPETITION MONOPOLISTIC COMPETITION IMPERFECT COMPETITION MONOPOLY OLIGOPOLY .

.MONOPOLISTIC COMPETITION ‡Refers to a market organization ‡Fairly large number of firms ‡Selling closely related but not homogenous products.

a situation in which few companies control the major part of a particular market ««« .OLIGOPOLY In economics .

Oligopoly is a market type in which: A small number of firms compete. . Natural or legal barriers prevent the entry of new firms.Another market type that stands between perfect competition and monopoly.

.FEATURESt. Small no of firms Interdependence Advertising and selling costs Group behavior .

SMALL NUMBER OF FIRMS « In contrast to monopolistic competition and perfect competition. an oligopoly consists of a small number of firms. ² Each ² The ² The firm has a large market share firms are interdependent firms have an incentive to collude .

INTERDEPENDENCE When a small number of firms compete in a market. Before making a decision. each firm must consider how the other firms will react to its decision and influence its profit. they are interdependent in the sense that the profit earned by each firm depends on the firms own actions and on the actions of the other firms. .

IMPORTANCE OF ADVT &SELLING COST In oligopoly different firms have to employ various aggressive and defensive marketing weapons to gain a greater share in the market««. boimoi-it is only under oligopoly that advertisement comes fully into its own .prof.

TYPES OF OLIGOPOLY Pure oligopoly-where sellers sell almost similar type of product Differentiated oligopoly-where firms are in the same line of business but products may not be absolute homogeneous .

EXAMPLES OF OLIGOPOLY Supermarkets Banking industry Chemicals Oil Medicinal drugs Broadcasting .

Because oligopoly is inefficient.IS OLIGOPOLY EFFICIENT? In oligopoly. price usually exceeds marginal cost . Oligopoly suffers from the same source and type of inefficiency as monopoly. So the quantity produced is less than the efficient quantity. antitrust laws and regulations are used to try to reduce market power and move the outcome closer to that of competition and efficiency. .

CONCLUSION .