Business-monopolies and oligopolies

• A collusive oligopoly is when firms in the market cooperate to fix prices or output levels to maximize joint profits.
• An oligopoly is a market structure where a few large firms dominate the market and have the power to set prices.
• A monopoly is when one firm dominates the market
• A duopoly is a type of oligopoly where there are only two dominant firms in the market.
• What are the six characteristics of a monopoly?


  High profitability, high barriers to entry, price-setting ability, sole seller, price discrimination, few substitutes
• What defines a pure monopolist?


  A pure monopolist is a single supplier that dominates the entire market with 100% concentration.
• What percentage of total sales does the UK Competition and Markets Authority (CMA) consider a working monopoly?


  Greater than 25%
• How does Tesco exemplify monopoly power in the UK grocery market?


  Tesco has a 30% market share, which gives it monopoly power.
• What would happen if Sainsbury's and Asda merged in terms of monopoly power?


  They would likely have a combined market share exceeding 30%, granting them monopoly power.
• What defines a dominant firm in a market?


  A dominant firm has at least 40% of its given market.
• Which company dominates the search engine market?

  Google, with a 90% market share.
• What is the market share of Gillette in the men’s razor market?


  Over 65%
• How is monopoly power assessed?


  It depends on how we define the scope and size of the market.
• What is a natural monopoly?


  A natural monopoly occurs when one large business can supply the entire market at a lower price than multiple smaller ones.
• Give an example of a natural monopoly.


  The UK rail network (Network Rail).
• What is the key role of competition authorities like the CMA?


  To protect the public interest against firms abusing their dominant positions.
• What powers does the CMA have regarding firms with monopoly power?


  The CMA can fine, cap prices, break up, or prevent mergers of firms that abuse their monopoly power.
• What are the arguments against monopolies?


  • Lack of consumer choice
  • Higher prices and company profits
  • Consumer exploitation
  • Inefficiency and misallocation of resources
  • No incentive for efficiency
• What are the arguments for monopolies?


  • Generate economies of scale
  • Potential for lower prices
  • Profits may lead to investment in R&D
  • Higher likelihood of innovation
  • Natural monopolies are more efficient
• What are the characteristics of oligopolies?


  High barriers to entry, high concentration ratio, interdependence of firms, product differentiation.
• What is a duopoly?


  A duopoly is a market where two firms dominate.
• What are the behaviors typically observed in an oligopoly?


  • Non-price competition
  • Stable, higher prices
  • Price wars
  • Collusion
  • Entry barriers
• What is game theory in the context of oligopolies?


  Game theory predicts outcomes in strategic games where participants have incomplete information about others' intentions.
• What are the characteristics of perfect competition?


  Large number of buyers and sellers, price takers, homogenous products, no barriers to entry/exit, little scope for economies of scale, perfect information, perfectly elastic demand curve, profit maximization, normal profits in the long run.
• What are the four basic types of market structures?

  1. Perfect competition
  2. Monopolistic competition
  3. Oligopoly
  4. Monopoly
• What are the arguments for and against oligopolies?


  For:

  • Price makers
  • Non-price competition benefits consumers
  • Economies of scale

  
  

  Against:

  • Higher prices
  • Reduced competition
  • Profits may not benefit society