a. Market control by many small firms
c. Market control by a few large firms
e. Difficult entry
Explanation:
The oligopoly is a type of market where only a few dominant firms operate in such markets. Each of these firms has a significant presence in the market and can influence the pricing process. A special form of oligopoly - if there are only two firms in the market - is called duopoly. In other words, oligopoly means that there are many buyers in front of a small number of firms that will affect each other in the same field of activity.
When one firm's decision-making activities of other firms in the same area of activity are unaware and independent of each other's activities, it does not represent an oligopoly concept. There are certain conditions for a market to be an oligopoly market. These are the conditions that differentiate firms operating in the same field from other markets.
Features of oligopoly:
- It is important that firms operating in the oligopoly market have a mutual relationship with one another. It is important to follow and evaluate the behavior of one firm in terms of both the business and the competition and the decisions it makes by another firm. Otherwise, it is not appropriate to talk about oligopoly.
- Goods and services produced in oligopoly markets are sometimes delivered to consumers in completely different and sometimes different ways. If the goods and services produced in the oligopoly market are completely identical or completely substituted for each other, they are called pure oligopoly. An example is the goods produced in the oil sector.
- Another feature of the oligopoly market, unlike other markets, is that firms that have entered this market have to take into account pricing strategies, production volumes, consumer masses and similar variables in the market. This is one of the features that indicate that access to the oligopolistic market is difficult.
Types of oligopoly:
-Cournot model is the first and most widely used model in duopol models. Thus, it was founded in 1938 by the French economist Agustin Cournot. Agustin Cournot investigated how much of the market will be sold by two separate firms that use the same mineral water as their raw materials. One of the firms produces goods for half of the aggregate market demand in terms of profit margin. The other company selects the rest of the market with a target mass and produces the appropriate goods. Quantity strategy, not price, is important here.
In contrast to the Cournot model in the Bertrand model, firms act in accordance with their pricing strategies instead of the sales volume. According to the price of the first firm on the commodity, the second firm offers a lower price than the consumer. Accordingly, the first firm also offers a lower price on the market than the second. This implies the concept of price competition and, in this case, continues to the minimum profit margin.
-Chamberlin model. Firm A is the only manufacturer of the same kind in the market. Company B enters the market and starts producing this type of product. Here Company B operates in accordance with the firm's market strategy and operates on its experience. Unlike other models, the two existing companies in the market understand that they are interdependent and act on a common point.
- The Edgeworth model is the first company in the market to maintain a high level of profitability. On the other hand, a second firm that enters the market from a competitive position and redirects the mass to itself. In response, the first firm drops prices compared to the second firm. At the same time, the second firm is lowering the price of the first firm again. As this competition continues, firms are already thinking that they have created their target mass at some point. In this case, they start to raise prices. In the end, a wave-price mechanism emerges. This price volatility in the market continues until firms realize they have to share the market .
- In the Stackelberg model, one of the two firms in the market is a leader and the other is a successor company. The leader firm does not regard the pursuit firm as a powerful competitor and enables it to operate in the market. The pursuant firm, in turn, operates for maximum profit from its falling market share.
