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Economy..Oligopoly

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THE IIS UNIVERSITY
JAIPUR

Indian Airlines- an oligopoly

INDEX

ACKNOWLEDGEMENT

WHAT IS OLIGOPOLY?
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Oligopoly has its own market structure.[1]
With few sellers, each oligopolist is likely to be aware of the actions of the others. According to game theory, the decisions of one firm therefore influence and are influenced by decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants.
The major characteristics of a market proving it to be an oligopoly are:- 1. Profit maximization conditions An oligopoly maximizes profits. 2. Ability to set price
Oligopolies are price setters rather than price takers. 3. Entry and exit
Barriers to entry are high. The most important barriers are government licenses, economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. Additional sources of barriers to entry often result from government regulation favoring existing firms making it difficult for new firms to enter the market. 4. Number of firms
"Few" – a "handful" of sellers.[3] There are so few firms that the actions of one firm can influence the actions of the other firms. 5. Long run profits
Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits. 6. Product differentiation
Product may be homogeneous (steel) or differentiated (automobiles).[4] 7. Perfect knowledge
Assumptions about perfect knowledge vary but the knowledge of…...

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