Please go online and find an example that you will cite to illustrate oligopoly
ID: 1120569 • Letter: P
Question
Please go online and find an example that you will cite to illustrate oligopoly behavior. You can choose an oligopoly that primarily competes by setting quantities (and letting prices adjust) or you can choose one that primarily competes by setting prices (and letting quantities adjust).
Once you've settled on your example and have written 2-3 sentences to describe and justify its status as an oligopoly rather than monopolistic competition, for instance, then tell us which model (Cournot or Bertrand) might best describe the industry as well as the predicted outcome we get from the theory.
In what way are the firm's decisions affected by the presence of the other firms? Do we actually observe an outcome that looks like a Cournot or Bertrand equilibrium? Why or why not?
Please explain in detail and in 3 different paragraphs with a lot of detail in each paragraph. Thank you!
Explanation / Answer
An oligopoly is when a small group of sellers control the market for a particular commodity. As the only sellers of the commodity they can manipulate the price and supply of the commodity. Although not a perfect example the market for oil/ petroleum is a good example of an oligopoly. The countries in OPEC(Oil producing and exporting countries) form an oiligopoly as the control almost all the oil that is produced in the world. These countries control the world supply of oil htorugh an agreement. The agreement prevents a member country from producing more units of oil to earn profits. The artificial creation of a supply cruch pushes up the pirce of oil.
thus the oil and gas industry can be said to be oligopoly form of market structure where few nations who have oil reserves decide on the current production and supply of oil with each other consent which directly influences the price of oil.
This market is a better example of a cournot model as the decsion making is based on quanity rather than price. No we dont observe cournot outcomes in the oil and gas industry as the number of firm in reality are more than 2. More over the OPEC doesnt control the entire world supply of oil though they control most of it . The OPEC is an example of countries colluding to form a cartel