Monopoly & Oligopoly

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Information about Monopoly & Oligopoly

Published on March 20, 2010

Author: MohammedDanish


Slide 1: MANAGERIAL ECONOMIC’S Slide 2: MONOPOLY & OLIGOPOLY PRESENTED BY - : PRESENTED BY - MohammedDanish Vikita Shah Saurabh Kadam Deepika Harale Sayli Ghodke Ayaz Momin Akshata Chavan Purva Pawaskar What are Markets? : 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 : ESSENTIALS OF MARKET Commodity for transaction Network of buyers & sellers Competition between buyers & sellers A place or a situation for transaction Types of market : Types of market Perfect competition Monopolistic competition Monopoly Oligopoly Monopoly : Monopoly A market structure in which only one Producer or seller exists for a Product that has no close substitutes FEATURES OF MONOPOLY : FEATURES OF MONOPOLY Single seller: There is single producer under Monopoly . So monopoly firm and industry are identical. No substitutes: There are no close substitutes for the product of monopolist. Absence of competition: There is no competition for a monopolist product as he is the only seller ruling the market. Contd……… : Contd……… Price maker: A monopolist is a price maker and not price-taker. He can fix his own price policy and maximize profit. Inelastic demand curve: A monopoly firm faces a downward slopping demand curve. No free entry and exit: The monopolist has no immediate rivals due to barriers which block the entry of new firms. TYPES OF MONOPOLY : TYPES OF MONOPOLY Natural Monopoly: such monopoly arises due to endowment of resources by nature. Natural advantages such as climatic condition, good location, availability of certain minerals etc. creates natural monopoly. Legal Monopoly: It is also known as statutory monopoly. It is given by law. Pure Monopoly: It is a market in which there is single seller & large number of buyers . it is compete negations of competition. Contd……… : Contd……… Limited Monopoly: When there are few sellers & large number of buyers then limited monopoly exist. Public Monopoly : When monopoly is firm is owned , managed & controlled by government then it is called as public monopoly. Simple Monopoly: when monopoly Charges same price for his commodity from all buyers in the market then it is called as simple monopoly. EXAMPLES OF MONOPOLY : EXAMPLES OF MONOPOLY The most recent example I can think of is the Microsoft/Netscape fued. A monopoly is when a corporation corners a market and makes competition for the same product or services non-viable. An example would be to say if Comcast was the only cable television provider in your area. If you want cable, you have no choice but to go to Comcast and because of this they can charge anything they want. CONTD… : CONTD… The best example was the monopoly held over telephone service by AT&T (Bell telephone)...It used to be that if you wanted telephone service you HAD to have Bell (with some exceptions around the country) and nothing else. For almost a century, Bell Telephone (renamed AT&T in 1899) enjoyed a monopoly in the United States. CONTD…. : CONTD…. Another example that is frequently pointed out is Standard Oil. But there is some discussion as to whether or not it was a true monopoly. Standard Oil was a predominant American integrated oil producing, transporting, refining, and marketing company. Established in 1870, it operated as a major company trust and was one of the world's first and largest multinational corporations until it was broken up by the United States Supreme Court in 1911.[3] John D. Rockefeller was a founder, chairman and major shareholder, and the company made him a billionaire and eventually the world's richest man. Price Discrimination : Price Discrimination Price Discrimination is the way consumer are charged maximum amount they pay for each unit of goods. Price Discrimination Monopoly : Price Discrimination Monopoly Identifying groups Ability Inelastic demand Elastic demand Conditions : Conditions Set the price Fegment the market Restricted Monopoly In Financial Market : Restricted Monopoly In Financial Market The tendency of natural monopolies in the financial markets must be restricted. “Natural monopolies are a threat," creating a creative competitive atmosphere in the financial markets would spur growth. - C Rangarajan He also talked of establishing a relationship between sectoral regulator and competition. The panel discussion set the stage for The release of a report by CUTS titled, “Competition & Regulation in India, 2007 Oligopoly : Oligopoly According to, In economics ,a situation in which few companies control the major part of a particular market ……… Slide 20: Another market type that stands between perfect competition and monopoly. Oligopoly is a market type in which: A small number of firms compete. Natural or legal barriers prevent the entry of new firms. Features….. : Features….. Small no of firms Interdependence Advertising and selling costs Group behavior Small Number of Firms : Small Number of Firms In contrast to monopolistic competition and perfect competition, an oligopoly consists of a small number of firms. Each firm has a large market share The firms are interdependent The firms have an incentive to collude Interdependence : Interdependence When a small number of firms compete in a market, 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. Before making a decision, each firm must consider how the other firms will react to its decision and influence its profit. Importance of advt&selling cost : 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…….prof. boimoi-it is only under oligopoly that advertisement comes fully into its own Types of oligopoly : 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 : Examples of oligopoly Supermarkets Banking industry Chemicals Oil Medicinal drugs Broadcasting Is Oligopoly Efficient? : Is Oligopoly Efficient? In oligopoly, price usually exceeds marginal cost . So the quantity produced is less than the efficient quantity. Oligopoly suffers from the same source and type of inefficiency as monopoly. Because oligopoly is inefficient, antitrust laws and regulations are used to try to reduce market power and move the outcome closer to that of competition and efficiency. Monopoly v/s Oligopoly : Monopoly v/s Oligopoly Conclusion : Conclusion

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