Analysis for

OLIGOPOLISTIC
AND
COMPETITIVE
Jay b. domingo

MARKETS
Managerial
economics

Objective of the
presentation
• To analyze and compare oligopolistic and competitive
market structures
• understand their characteristics, advantages, disadvantages,
and their implications for consumers, firms, and the overall
economy.

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Managerial econimics

MARKET
STRUCTURES:
• Oligopolistic Market:
A market structure dominated by a few large
firms.

• Competitive Market:
A market structure with many small firms
competing against each other.
Managerial economics

TYPES OF
OLIGOPOLY
• Collusive Oligopoly:
A. Firms cooperate to restrict competition
B. Cartels and price-fixing agreements

• Non-collusive Oligopoly:
A. Firms compete aggressively
B. Price wars, advertising battles, and new product
development
Managerial economics

CHARACTERISTICS OF
OLIGOPOLISTIC MARKET
FEW INTERDEPEN BARRIERS TO Product
LARGE DENCE ENTRY differentiation:
FIRMS
A small number of dominant firms The actions of one firm impact the others, High entry barriers such as economies of Firms may differentiate their products
control a significant share of the market. leading to strategic decision-making. scale, patents, or government regulations. through branding, innovation, or
marketing.
Managerial
economics

MARKET CONDUCT IN
OLIGOPOLY • Strategic decision-making:
⚬ Interdependence leads to complex decision-making
⚬ Firms consider rivals' actions and reactions

• Price determination:
⚬ Pricing strategies such as price leadership or price matching
⚬ Non-price competition (e.g., advertising, product differentiation)
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market

ADVANTA DISADVAN
GES TAGES
• Economies of scale • Limited competition
• Innovation • Collusion and price-fixing
• Marketing and advertising • Barriers to entry
Managerial economics

CHARACTERISTICS OF
COMPETITIVE MARKET
MANY PRICE EASY ENTRY Homogeneous
SMALL TAKERS AND EXIT
FIRMS products
Numerous firms operate in the market, Firms have no market power and must Low barriers to entry allow new firms to Firms offer similar products, leading to
each with a relatively small market accept prevailing market prices. enter, fostering competition and price-based competition.
share.. innovation.
Managerial economics competitive Page 06 of 15

market

ADVANTA DISADVAN
GES TAGES
• Lower Price • Lack of Innovation
• Increased consumer choice • Price Volatility
• Efficiency • Profit Limitations
Managerial
economics

Market Conduct in Competitive

Market • Price determination:
⚬ Firms are price takers
⚬ Prices determined by market forces (supply and demand)

• No individual market power:

⚬ Each firm has negligible influence on market price
⚬ No need to consider rivals' actions

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Managerial Economics

IMPLICATION
S FOR
CONSUMERS • Oligopolistic markets: Consumers may have
limited choices, face higher prices, but
benefit from product differentiation and
innovation.
• Competitive markets: Consumers enjoy
lower prices, greater variety, but may
experience less product differentiation and
limited innovation.
Managerial economics

IMPLICATI
ONS FOR
FIRMS
• Oligopolistic markets: Firms have market
power, invest in branding, innovation, and
marketing, but face risks of collusion and
anti-competitive behavior.
• Competitive markets: Firms have limited
market power, focus on cost efficiency, face
price competition, but benefit from easy
entry and exit.
Managerial economics

IMPLICATIO
NS FOR THE
ECONOMY
• Oligopolistic markets: Can stimulate innovation,
contribute to economic growth, but may result in
income inequality and reduced consumer welfare.

• Competitive markets: Foster efficiency, lower prices,

promote consumer welfare, but may have limited
incentives for innovation
Managerial
economics

Conclusion
Oligopolistic markets offer economies of scale and innovation but can
limit competition. Competitive markets provide lower prices and
increased consumer choice but may lack incentives for innovation. The
optimal market structure depends on various factors and balancing the
interests of consumers, firms, and the overall economy.