There are four market structures in our economy today : Perfect
competition, monopolistic competition, oligopolies and monopolies. This essay
shall describe the oligopoly market.
The definition of an oligopoly states that in an industry, a small
number of firms dominate the market. There are a low number of firms in the
industry, becasue and adding to the barriers to entry. The barriers of entry to
an oligopolistc market include the financial resources needed to enter and such
regulations from the government or patents.
In this market, there is a high degree of differentiated products, and
so with all of the above factors combined in this market, the competition is of
sales, not of price. There is also a factor of concern from the firms in an
oligopolistic market – where the actions of one firm will subsequently effect
the other firms in the industry. This results in each oligopolist watching its
competitors closely, and is a method of competition between the firms, other
than by price wars.
The Kinked Demand Curve, is the economical graph that shows why
oligopolists tend to adopt a common price -to achieve the greatest price and
The Hilmer committe, estabilished 1993, is a government body who acts in
the interests of recommendations of National Competition policies.
In 1995, the Trade Practises Act (T.P.A.) was introduced. The T.P.A.
sets out the general responsibilities of sellers, such as the firms of
oligopolies, and out laws actions that may be unfair to the consumers. This
includes misleading advertising, market sharing and collusion.
Collusion is where the firms of an industry meet a set, common price, or agree
not to come into each other in the market area. These two above practises are
ways of government intervention that regulate the conduct of oligopolies.
Australian examples of oligopolies include, Hoyts, Kelloggs, Bridgestone,
Dunlop, Carlton United, Dulux and Coca Cola.
In conclusion, Oligopolists tend to adopt a similar price, for similar
products, If price is to be raised, the firms find it best to do so together.
Oligopolists avoid price wars. Sales competition, not price competition is