Pick an oligopolistic industry. Explain how it fits into the essential character
ID: 1104564 • Letter: P
Question
Pick an oligopolistic industry. Explain how it fits into the essential characteristics of an oligopoly by responding to the following prompts.
a. Who are the few large producers?
b. What product is being produced? Is it homogeneous or differentiated?
c. How do the firms use price, quality, location, service, and advertising strategies to exert control over prices?
d. Do you think cost is a barrier to entry in the industry? (Just answer yes or no.)
e. Have there been any recent real-world mergers in the industry?
Explanation / Answer
Lets consider the market for computers:
a. The main producers in the US for instance will be Lenovo, Apple and HP.
b. Product produced are laptops. They are differentiated which allows the sales of the product.
c. Such firms use considerable advertising and sales techniques to boost sales. They also provide offers with their products They also locate showrooms at frequent intervals to cater to customer needs. The aim is also to prevent quality defects as much as possible.
d. Cost is a barrier to entry. Unless newly enterring firms benefit from certain economies of scale they cannot succeed in the market. So costs must be below a threshold for succesful entry.
e. A good example of a merger in the industry would be the merger between HP and Compaq.