Most closely matches the concept of oligopoly. Oligopoly. How does oligopoly manifest itself in the market of cellular operators

From this article you will learn:

Monopoly, preventing competition, suppressing it, acts in the opposite direction. To avoid negative consequences monopoly, intervenes in market processes, using antimonopoly regulation.

It includes:

1) administrative control over monopolized markets;
2) organizational mechanism;
3) antimonopoly legislation.

Antimonopoly control of monopolized markets combines methods of influencing monopolized production. This includes financial sanctions in case of violation of antitrust laws. There are cases when a firm, caught in the systematic use of unfair competition methods and losing a lawsuit, is subject to direct dissolution.

The organizational mechanism of antimonopoly regulation aims to resist monopoly by preventive methods. Without affecting monopoly as a form of production, the ways and methods of such state policy are aimed at making monopolistic behavior for big business disadvantageous. These methods include regulation customs duties, the abolition of quantitative quotas, support for small businesses, simplification of the licensing procedure, optimization of production, whose products can compete with monopoly goods, etc.

The most efficient and advanced form state regulation monopoly power is antitrust law.

Antitrust law is regulations, defining the organizational and legal basis for the development of competition, measures to prevent, restrict and suppress monopolistic activities and unfair competition. Such legislation in the United States is called antitrust legislation. In this regard, the most famous are the laws of Sherman (1890), Clayton (1914), the Celler-Kefauver law (1950).

Antitrust law outlaws price discrimination against buyers when such discrimination is not justified by cost differences. Antitrust laws prohibit the acquisition of shares in competing corporations if doing so would weaken competition. The laws prohibit collusion aimed at limiting production or trade, and criminalize attempts to monopolize any part of production or trade.

To protect the rights of consumers from monopolistic activity and develop competition, the legislation prohibits: limiting or stopping the production of goods, as well as the production and supply of raw materials, components, components without prior agreement with the main consumers; reduce the supply or delay the sale of goods in order to create, maintain or increase shortages and raise prices. It is prohibited to compel the consumer to include in the subject of the contract goods that he does not need, to set other preliminary discriminatory conditions, it is prohibited to stop or delay the supply of goods or the performance of services in response to the buyer's claims to the quality of goods.

The antimonopoly legislation establishes forms of warning, responsibility and compensation in case of commission of prohibited actions.

In order to limit monopolistic activity and encourage competition in countries with market economies, state antimonopoly bodies are being created. In the United States, antitrust regulation is carried out by the antitrust office of the Department of Justice and the Federal trade company, in Japan - the Commission for Fair Deals, in France - the Competition Council. In the Republic of Belarus in 1992, a law was adopted on combating monopolistic activity and developing competition.

Antimonopoly activity is a direct support for entrepreneurship and the development of market competition in the economy.

Oligopoly competition

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1. The product of each firm trading in the market is an imperfect substitute for the product sold by other firms.
2. There are a relatively large number of sellers in the market, each satisfying a small but not microscopic share of the market demand for a common type of product sold by the firm and its rivals.
3. Sellers in the market place no regard for the reactions of their rivals when choosing how to price their wares or when choosing annual sales targets.
4. The market has conditions for free entry and exit

Although, in a market with monopolistic competition, each seller's product is unique, between various types products, enough similarities can be found to group sellers into broad, industry-like categories.

A product group is a group of closely related but not identical products that satisfy the same customer need. In each product group, sellers can be viewed as competing firms within the industry. Although there are problems with defining the boundaries of industries, i.e. When defining an industry, a number of assumptions must be made, and a number of relevant decisions must be made. However, when describing an industry, it may be useful to cross-estimate the products of competing firms, since in an industry with monopolistic competition, the cross-demand for competing firms' products should be positive and relatively large, which means that competing firms' products are very good substitutes for each other, which means that if the firm raises the price above the competitive price, it can expect to lose significant sales volume in favor of competitors.

Typically in markets with the most monopolistic competition, the top four firms account for 25% of total domestic supply, while the top eight firms account for less than 50%.

An oligopoly is a market structure in which very few sellers dominate the sale of a product, and the emergence of new sellers is difficult or impossible. The goods sold by oligopolistic firms can be both differentiated and standardized.

Typically, oligopolistic markets are dominated by two to ten firms that account for half or more of total product sales.

In oligopolistic markets, at least some firms can influence the price due to their large shares in the total quantity produced. Sellers on oligopolistic market know that when they or their rivals change prices or output, there will be consequences for the profits of all firms in the market. Sellers are aware of their interdependence. Each firm in an industry is expected to recognize that a change in its price or output will elicit a reaction from other firms. The response that any seller expects from competing firms in response to changes in the price set by him, the volume of output, or changes in marketing activities, is the main factor determining his decisions. The response that individual sellers expect from their rivals affects the equilibrium in oligopolistic markets.

In many cases, oligopolies are protected by entry barriers similar to those for monopoly firms. A natural oligopoly exists when a few firms can supply an entire market at a lower long-run cost than many firms would.

1. Only a few firms supply the entire market. The product can be either differentiated or standardized.
2. At least some firms in an oligopolistic industry have large market shares. Consequently, some firms in the market are able to influence the price of a product by varying its availability in the market.
3. Firms in the industry are aware of their interdependence.

There is no single oligopoly model, although a number of models have been developed.

In oligopolistic markets, individual firms take into account the possible reaction of their competitors before they start advertising and undertake other promotional expenses. An oligopolistic firm can significantly increase its market share through advertising only if rival firms do not strike back by starting their own. advertising campaigns.

In order to better understand the problems that an oligopolistic firm faces when choosing a marketing strategy, it is useful to approach it from a game theory perspective. Those. firms must develop a maximin strategy for themselves, and decide whether it is profitable for them to start advertising campaigns or not. If firms do not start advertising campaigns, then their profits do not change. However, if both firms seek to avoid the worst outcome by pursuing a maximin strategy, then they both prefer to advertise their product. Both chase profits and both end up with losses. This is because each chooses the strategy with the least loss. If they agreed not to advertise, they would make big profits.

There is also evidence that advertising in oligopolistic markets is carried out on a larger scale than is necessary to maximize profits. Often, advertising by competing firms only leads to increased costs, without increasing sales of products, because. rival firms cancel each other's advertising campaigns.

Other studies have shown that advertising improves profits. They point out that the higher the share of advertising spending relative to industry sales, the higher the industry's rate of return. And since higher profit margins indicate monopoly power, this implies that advertising leads to greater price control. It is not clear, however, whether higher advertising costs lead to higher profits, or whether higher profits cause higher advertising spending.

Other oligopoly models

To try to explain certain types business conduct, other oligopoly models have been developed. The first attempts to explain price fixity, the second why firms often follow the pricing policy of a firm that is the leader in announcing price changes, and the third shows how firms can set prices so as not to maximize current profits but maximize profits in the long run. by preventing new sellers from entering the market.

Conditions for an oligopoly

Another market model is an oligopoly, which differs significantly from those discussed above. Its first and main feature is the presence on the market of a limited number of manufacturers. Typically, these companies produce a similar but not the same product, have a large volume of production, and each of them controls a significant market share. Examples of an oligopoly are producers of non-ferrous metals (especially aluminum), steel, automobiles, tobacco products, certain types of alcoholic beverages, etc.

Let's take the automotive industry as an example. This is an industry industrial production very useful for demonstrating the oligopoly model. There are three main manufacturers in the US auto industry (for simplicity, we can ignore imports, since their role is only to expand the market model, and not to change its conditions). We are talking about the companies "General Motors", "Ford" and "Chrysler".

They produce vehicles various types and purposes, i.e. similar products that, from an economic point of view, have the same utility for the consumer. In an oligopoly - with a limited number of producers - one of them has a significant impact on the rest.

Due to the size of the above automobile companies and the similarity of the product produced, the actions that any of them can take in the market will have completely different consequences than in other market models. As a result, the entire market can be deformed.

Suppose that Ford Motors decides to cut prices in order to gain additional market share. Of course, the standard demand curve shows that if the price of a product is lowered, market share can be expected to increase.

On fig. shows that the top of the broken demand line declines to the right to the point where Ford decides to cut the price (the curve breaks and continues to decline from a lower level to a certain market-driven point).

The two parts of the broken line are connected by a dotted line. This is due to the response of two other companies, which also reduce prices. But if they do, then other companies should do the same. As a result, all companies lose profits because they must lower prices, and none of them will succeed in capturing additional market share. What should oligopolists do in this case?

It seems logical that three car manufacturers would meet for a business meeting and agree on price levels, output volumes and other marketing aspects of their activities. However, in the United States, holding such meetings is prohibited by law, which qualifies them as collusion. There are three types of collusion. The first is explicit (open), as in the example above. Producers openly meet to discuss price levels, which is known to all.

In some countries this is considered illegal, but in others and in some industries it is even encouraged. In each country, the position of the law on this issue is different. Another type of collusion is clandestine: producers hold a secret meeting, hidden from the public eye, and the decisions made are usually not disclosed to either the public or the authorities. Collusions are illegal in the United States and several other countries.

There is a third type of collusion - this is implied collusion: each company understands what is good for it and for the entire industry as a whole and tries to follow some unspoken set of rules without discussing its actions with competitors. Consequently, under these conditions, Ford Motor Company will never decide to cut prices, knowing that this will lead to a loss of profit throughout the automotive industry. This type of collusion is not illegal, mainly because its existence cannot be proven. In fact, if someone proceeding from their own interests, acts on the market according to all known rules, then this will not be contrary to the laws.

Understanding by the marketing manager of the fact that it is necessary to compete with other companies not on price, but on a different basis, is the marketing imperative in an oligopoly market. As a consequence of this understanding, in the automotive industry, fierce competition is unfolding between manufacturers in the areas of safety, fuel efficiency of automotive engines, style and luxury design. car showroom and the application of advanced technologies, which is more productive and beneficial to society as a whole.

So, since the oligopolists know well what is profitable for them, they act in concert, and usually the result of this is the same as in a monopoly. However, in each country there are special bodies that monitor the activities of oligopolists, which can actually set their own monopoly conditions in the market. The main claims against the oligopoly boil down to the fact that they are so strong that they influence the international market.

Indeed, large oligopolistic companies are often found in the world market and cooperate with other companies and countries in production. This is typical for the automotive industry. For example, the automotive giants of Japan, Germany and the United States have been cooperating for some time in the production of cars.

monopolistic oligopoly

Monopolistic competition occurs when many sellers compete to sell a differentiated product in a market where new sellers can enter.

A market with monopolistic competition is characterized by the following:

1. The product of each firm trading on the market is an imperfect substitute for the product sold by other firms.

Each seller's product has exceptional qualities and characteristics that cause some buyers to prefer its product to that of a competing firm. Product differentiation means that the item sold on the market is not standardized. This may be due to actual quality differences between products, or to perceived differences that result from differences in advertising, brand prestige, or "image" associated with owning the product.

2. There are a relatively large number of sellers in the market, each of which satisfies a small but not microscopic share of the market demand for a common type of product sold by the firm and its rivals.

Under monopolistic competition, the size of the market shares of firms, in general, exceeds 1%, i.e. i.e., the percentage that would exist under perfect competition. Typically, a firm accounts for between 1% and 10% of market sales during a year. 3. Sellers in the market do not consider the reactions of their rivals when choosing how to price their goods or when choosing annual sales targets.

This feature is still a consequence of the relatively large number of sellers in the market with monopolistic competition. Those. if an individual seller cuts the price, it is likely that the increase in sales will come not from one firm, but from many. As a consequence, it is unlikely that any individual competitor will suffer a significant loss in market share due to a decrease in the selling price of any individual firm. Therefore, there is no reason for competitors to react by changing their policy, since the decision of one of the firms does not significantly affect their ability to make profits. The firm knows this and therefore does not take into account any possible competitor reaction when choosing its price or sales target.

4. The market has conditions for free entry and exit. With monopolistic competition, it is easy to start a firm or leave the market. Favorable market conditions with monopolistic competition will attract new sellers. However, entry into the market is not as easy as it would be under perfect competition, as new sellers often struggle with their new brands and services to buyers. Therefore, already existing firms with established reputations can maintain their advantage over new producers. Monopolistic competition is similar to a monopoly situation in that individual firms have the ability to control the price of their goods. It is also similar to perfect competition in that each commodity is sold by many firms, and there is free entry and exit in the market.

The existence of an industry under monopolistic competition

Although each seller's product is unique in a market with monopolistic competition, enough similarities can be found between different kinds of products to group sellers into broad categories similar to an industry.

However, when describing an industry, it may be useful to estimate the cross elasticity of demand for the goods of competing firms, since in an industry with monopolistic competition cross elasticity The demand for competing firms' products must be positive and relatively large, which means that competing firms' products are very good substitutes for each other, which means that if a firm raises its price above the competitive one, it can expect to lose a significant amount of sales to competitors.

Typically in markets with the most monopolistic competition, the top four firms account for 25% of total domestic supply, while the top eight firms account for less than 50%.

Typically, oligopolistic markets are dominated by two to ten firms that account for half or more of total product sales.

In oligopolistic markets, at least some firms can influence the price due to their large shares in the total output of the goods. Sellers in an oligopolistic market know that when they or their rivals change prices or output, there will be repercussions for all firms in the market. Sellers are aware of their interdependence. Each firm in an industry is expected to recognize that a change in its price or output will elicit a reaction from other firms. The response that any seller expects from competing firms in response to changes in the price set by him, the volume of output, or changes in marketing activities, is the main factor determining his decisions. The response that individual sellers expect from their rivals affects the equilibrium in oligopolistic markets.

The following features of oligopolistic markets can be distinguished:

1. Only a few firms supply the entire market. The product can be either differentiated or standardized.

2. At least some firms in an oligopolistic industry have large market shares. Consequently, some firms in the market are able to influence the price of a product by varying its availability in the market.

3. Firms in the industry are aware of their interdependence.

There is no single oligopoly model, although a number of models have been developed.

Oligopoly Models

collusive oligopoly model. In an oligopolistic market, each firm has a choice between cooperative () and non-cooperative (non-cooperative) behavior. In the first case, the firms are not bound in their behavior by any explicit or secret agreements with each other. It is this strategy that generates price wars. Firms come to cooperative behavior if they intend to reduce mutual competition. If, in an oligopoly, firms actively and closely cooperate with each other, this means that they collude. This concept is used when two or more firms have jointly fixed prices or outputs and divided the market or decided to do business together.

Collusion is a generic concept in relation to a cartel, a trust.

A cartel is a group of firms acting together and agreeing on output and price decisions as if they were a single monopoly.

In the US, cartels are illegal. However, firms often succumb to the temptation to collude, which provides an opportunity to insulate themselves from competition without resorting to an open agreement. from collusion, if successful, can be enormous.

The best-known international cartel is the Organization of the Petroleum Exporting Countries, which formed in 1960. In 1973, it first used its power to impose an oil embargo. Then the price of a barrel of crude oil tripled. During the 70s. OPEC has successfully controlled the export of crude oil. But by the mid 80s. there was a surplus of oil, and the price plummeted to less than $10 a barrel from $30 in 1979.

Price leadership model

In oligopolistic markets, one firm acts as a price leader that sets the price to maximize its profit while other firms follow the leader. Competing firms charge the same price as the leader.

The leading firm assumes that other firms in the oligopolistic market will not react in a way that will change the price it has set. The price leadership model is called partial monopoly because the leader sets the monopoly price, which is based on his marginal revenue and marginal cost. Other firms take this price as given, they follow the leader's prices, believing that larger firms have more information about market demand.

Price leadership has the character of covert collusion, since open price agreements are prohibited by antitrust laws. Price leadership has an advantage over a cartel because it preserves the freedom of firms in their production and marketing activities, whereas in cartels they are regulated by quotas and/or market delimitation.

There are two main types of price leadership:

A) leadership of the firm with significantly lower costs than the competitive environment;
b) the leadership of a firm that occupies a dominant position in the market, but does not differ significantly from followers in terms of costs.

Allocate a market model of a dominant firm with a competitive environment and closed entry and free entry.

Cournot duopoly model

The duopoly model was first proposed by the French mathematician, economist and philosopher Antoine-Augustin Cournot in 1838.

A duopoly is a market structure in which two sellers, protected from additional sellers, are the only producers of a standardized good that has no close substitutes. Duopoly economic models are useful for showing how an individual seller's guess about a competitor's response affects equilibrium output.

The Cournot duopoly model assumes that each of the two sellers assumes that its competitor will always keep its output unchanged at the current level. The Cournot model assumes that sellers do not learn about their mistakes.

There are various modifications of the duopoly model: the Chamberlin model, the Stackelberg model, the Bertrand model, and the Edgeworth model.

The specifics of the behavior of oligopolists in the market

The interdependence of oligopolistic firms in the market predetermines the specific behavior of oligopolies in the market. Unlike other market structures, an oligopolistic enterprise must always take into account that its chosen prices and output directly depend on the market strategy (behavior) of its competitors, which (behavior) in turn is determined by its chosen decision.

Because of this, the oligopolist:

Cannot treat the demand curve for its products as given;
does not have a given marginal revenue curve (as well as demand, MR varies depending on the behavior of the firm itself and its competitors);
does not have a clear point of equilibrium (just as it exists under perfect competition or under pure monopoly);
cannot use the equation MR=MC to find the optimum point.

Models of cooperative and non-cooperative oligopoly

The variety of forms of behavior of oligopolies and the peculiarities of their relationships in specific market situations predetermine the existence of a large number of various oligopoly models. Only taken as a whole, these models can give a reliable picture of the oligopolistic market.

It is conventionally accepted to divide oligopolistic markets into two types depending on how its participants interact with each other: cooperative oligopoly and non-cooperative oligopoly.

In a cooperative oligopoly, firms coordinate their behavior by colluding or otherwise coordinating their actions.

In a non-cooperative oligopoly, firms, striving to maximize profits, act independently, at their own peril and risk. In accordance with this division, oligopoly models are also classified.

As an example of non-cooperative oligopoly models, the following will be considered: the Cournot model, the Stackelberg model, the broken demand curve model. An example of a cooperative oligopoly model is the cartel model and price leadership models (price-dominating firm leadership and barometric price leadership). The game theory model will be considered in a separate section and will reveal the mechanism for the strategic choice of firms between cooperative and non-cooperative oligopolies.

Examples of an oligopoly

The example of electrical engineering, one of the most important branches of modern industry, shows the consequences for the economy of the cartel domination.

As you know, electrical engineering arose at the beginning of our century immediately as a branch of mass production. A few large manufacturers were trying to negotiate a division of the world market even before the First World War. However, the golden age of cartels did not come until the interwar period.

On Christmas Eve 1924, the Phoebus electric lamp cartel, named after the sun god, was formed in Geneva. Osram (Germany), Philips (Holland), General Electric (Great Britain) and others were its participants. In addition, both leading American manufacturers, General Electric and Westinghouse, tacitly joined it.

The whole world was divided into three regions:

A) the national territories of each of the participants;
b) overseas colonies of Great Britain;
V) common areas.

The markets of the national territories were reserved for local producers. This seemingly innocent condition actually meant the establishment of a monopoly there, which directly caused a sharp rise in prices. Thus, a 60-watt lamp cost 15 cents in the USA, where there was competition with Japanese firms that were not part of Phoebus. In Sweden, if there are more than weak competitors(cooperatives) the cartel achieved a price of 33 cents. And in Germany and Holland, where there were almost no rivals, the consumer paid 48 and 70 cents each. The maximum gap between monopoly and competitive prices was almost fivefold.

Even in neutral territories, where lamps of different firms were sold, and there was a semblance of competition, the total volume of production was fixed as definitely as if the market was controlled by a single monopoly firm.

The fruits of monopolization were not long in coming: the cartel began to resort to such unprecedented methods of increasing profits that no firm in an industry with strong competition would ever dare to do. Thus, cartel members were advised to limit the life of a light bulb to 1,000 hours, although the technology already existed to bring it to 3,000 hours. The calculation was simple: the faster the lamps burn out, the more new ones you need to buy to replace them. The cartel's chief coordinator, J. M. Woodward, informed them that limiting lamp life would double sales in five years.

Another innovation of the Phoebus cartel, which, by the way, has survived to this day, was the standard adopted by them, according to which lamps are labeled in watts, and not in lumens. Thus, when selling a lamp to a consumer, the secondary characteristic of the product (how much energy the lamp consumes) is reported and the main characteristic (how much light it gives) is hidden.

The Phoebus cartel did not survive the 1941-1949 legal investigation by the US antitrust authorities.

Scandalous revelations of collusion are periodically repeated not only in electrical engineering, but also in other industries up to the present. There is no doubt that cartels have retained their appeal to oligopolists.

Market structure oligopoly

There are very few markets in the world where there are a significant number of producers producing homogeneous products, which is characteristic of perfect competition. It is very rare to find industries in which a single firm (monopolist) produces a certain product with unique properties. Perfect competition and monopoly are two polar types of market structures.

Markets that are neither monopolistic nor perfectly competitive are considered by the theory of monopolistic competition and various theories of oligopoly. These theories explain the emergence of incentives for firms to differentiate their products, as well as the emergence of prerequisites for joint activities when setting prices.

Monopolistic competition is a market structure with elements of both perfect competition and monopoly.

Monopolistic competition is characterized mainly by the following features:

First, product differentiation. Each firm produces goods that are different from those of other firms. This differentiation may be real or imaginary;
secondly, the possession of a certain share of monopoly power received by the manufacturer as a result of product differentiation. Hence the incentive for differentiation;
thirdly, the stability of the clientele. If the price of a product rises, the firm does not lose all of its customers. The demand curve for a monopolistically competitive firm's product slopes from top to bottom to the right. However, the existence of many firms selling similar products makes the nature of the demand curve elastic;
fourthly, ignoring rivals independently operating in the market;
fifth, the absence of serious barriers to entry into the industry.

A monopolistically competitive firm is largely characterized by the features of a monopolist. The firm produces such a quantity of goods at which the equality of marginal income to marginal costs (MR - MC) is observed.

In the short term, the following rules apply:

If the price exceeds the total average cost - the firm makes a profit;
- if the price is less than the total average cost, - the firm continues to operate, as it has the ability to pay;
- if the price is less variable costs- the company stops production.

In the long run, monopolistically competitive firm earns only a normal profit. If the firm suffers losses, it leaves the industry. This means that the remaining firms have more consumers. The demand curve of each remaining firm shifts to the right. If a firm makes a profit, it attracts new firms to the industry. As a result, there are fewer buyers per firm in the industry. The demand curve shifts to the left.

In the long run, the firm's marginal income is equal to its marginal cost: MR - MC (the firm maximizes profits) AND P = &4C (price equals long-run average costs: the firm earns a normal profit).

When evaluating the impact of monopolistic competition on the economy, it is necessary to take into account a number of circumstances:

1. In this market structure resources are not allocated efficiently because the price exceeds the marginal cost in equilibrium. Society would benefit if more goods were produced.
2. It is believed that in conditions of monopolistic competition at the minimum point of the long-run average cost curve, production is not carried out. Firms do not take advantage of increased scale. A smaller number of firms producing independently more products would create products with lower average costs. However, the presence of more firms means that consumers have a wider choice of products and spend less effort to find a seller.
3. The specified market structure is characterized by non-price competition. A monopolistically competitive firm has an incentive to create products that are different from those of other manufacturers. Thus, it can shift the demand curve to the right and increase profits in the short run. Non-price competition suggests that the attractiveness of a product for consumers is achieved not so much by lowering prices, but by improving quality, creating new products, and improving service. An important means of non-price competition is advertising.

An oligopoly is a market structure in which a few firms dominate the market because existing barriers prevent new producers from entering the market.

The main characteristics of an oligopoly are:

Interdependence (since there are few firms in the industry, each is concerned about the behavior of rivals and, making its own decisions, tries to predict the next steps of competitors);
- presence on the markets of homogeneous products (aluminum) or differentiated products (washing machines);
- the predominance of non-price competition over price competition (it is more profitable for competitors to improve the product than to change its price).

There are several types of oligopoly. Their specificity is based on the difference in the firm's response to the actions of competitors.

The broken demand curve model makes it possible to understand why oligopolistic prices are more stable than prices in other market structures. This model is based on a number of assumptions: first, firms produce differentiated products; secondly, the oligopolistic firm assumes that the rival will not raise prices after it, which would lead to the loss of buyers. If the firm lowers its price, competitors will take a similar step, and then the firm will be unable to attract additional buyers; Thirdly, an oligopolistic firm maximizes profit by producing such a quantity of goods at which marginal revenue will be equal to marginal cost. Oligopolistic prices are usually stable.

The broken demand curve model has been criticized because it does not explain how the price level and output of a product are determined.

Game theory describes a situation where one firm's price decision depends on the opponent's predicted response. Typically, each firm's earnings are higher if the firms cooperate with other producers in the industry.

Collusion occurs when firms in a market coordinate their activities. Coordination accepts various forms. A cartel is an organization of producers who collectively determine the price level and output for each firm. A gentlemen's agreement is an informal agreement between firms to respect in practice the interests of oligopolistic firms.

The functioning of cartel agreements depends on several factors: the number of firms in the industry (the more firms, the more likely that any firm will violate the agreement; acting outside the cartel, the firm, by lowering prices, can increase profits by selling more goods); heterogeneity of the product (the more heterogeneous the product that is sold on the market, the more difficult it is to conclude a cartel agreement); legal barriers (laws against associations make them more difficult to establish).

When the cartel achieves a higher rate of profit, new firms are drawn into the industry. They force existing producers to provide them with a production quota or market share, or operate outside the cartel.

Consumers can easily find substitutes if the cartel operates long enough and raises prices significantly.

Price leadership is the practice in which one firm is allowed to change prices and the rest of the producers follow the leader in pricing.

The leader may be the largest firm in the industry, the manufacturer with the lowest , the firm that is the first to respond to changes in demand or cost levels.

When evaluating the impact of an oligopoly on the economy, it must be assumed that this market structure has such an advantage as economies of scale. The negative feature of this market structure is that prices are higher and outputs are lower compared to perfect competition.

The Schumpeter-Galbraith hypothesis suggests that oligopoly facilitates the development of production and the introduction of new technology. Because Scientific research expensive, only large firms can afford to spend money when the end result of the investment is unclear.

Critics of this hypothesis believe that large firms are not flexible and creative enough to develop new products.

Oligopoly pricing

In some industries, especially where there is an oligopoly, one company may set prices for the industry as a whole. These are the companies that dominate the industry. Examples include DuPont, Kodak, Hershey, U.S. Steel, National Gypsum, and Gillette.

The price leader must take his role seriously and exercise caution when setting prices. The firm needs to have a good understanding of industry parameters of costs and demand. If it is overly aggressive in setting prices, it could attract unwanted attention from antitrust enforcement officials. IBM has come under fire for what has been called "temporary price cuts to drive out a competitor," or aggressive tactics to establish low prices that ruined competitors. But as a result of price wars for both personal and basic computers, the company's price dominance has weakened. IBM can no longer use price leader strategies.

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oligopoly market - this is a form of market organization in which several large firms operate on the market, producing a homogeneous or differentiating product, and independently setting the price for their products, taking into account the possible market competition. An oligopoly exists only when the number of firms is so small that each of them must take into account the reaction of competitors when formulating its pricing policy. The oligopoly market is a typical form of modern market organization.

The oligopoly market is characterized by the following traits :

1. there are several large firms;

2. the share of each firm in the market is significant;

3. each firm independently sets the price, taking into account the possible reaction of competitors;

4. there are barriers to entry of new firms into the market;

5. non-price competition prevails, which can be substantive, specific and functional.

oligopoly market arises for the following reasons:

1. the effect of patents on scientific discoveries and inventions;

2. control over scarce resources;

3. the effect of economies of scale in production;

4. privileges from the state;

5. a consequence of competition.

The oligopoly market is characterized by a wide variety of forms of organization. The economic literature describes various approaches to the classification of the oligopoly market. Exists oligopoly market classification By:

A) Felner, who highlights:

The market is in the conditions of maximizing the profit of the industry;

Market in conditions of fundamental antagonism.

B) Makhlup, which highlights:

The market is fully coordinated;

Market partly coordinated by

a) a leading company

b) voluntary cooperation;

A market without coordination that can be represented

a) a price war

b) pursuing an aggressive trade policy;

c) a chain oligopoly.

B) according to the degree of antagonism

Market at war;

The market is in a state of truce;

The market is at peace.

Thus, there are several possible situations in the market:

a) price wars between firms;

b) price stability in the conduct of non-price competition;

c) agreements on prices and volumes of production, official or implicit;

d) predictable behavior of firms.

Oligopoly market in the absence of collusion

If firms are price-competitive, then an oligopoly market is similar to a perfectly competitive market. This situation is quite rare, since large firms can compete on price for a long time due to their large financial capabilities, which can lead to large financial losses.

One of the first models of the oligopoly market is the duopoly market, that is, the market on which 2 firms operate. The first duopoly market model was proposed in the 1940s. O. Kurno . He suggested that there are 2 firms that are the same in size, these firms have a constant effect of scale of production, that is, when the volume of production changes, average costs, and therefore the price does not change. Each firm decides on the volume of production independently, focusing on the free market share. If one firm appears on such a market, then it will produce products in the amount of 50% of the market capacity, since in this case the maximum revenue is provided. If a second firm enters this market, then it will focus on the market share not occupied by the first firm and will produce 50% of this share.

Rice. 6.1

This situation cannot persist for a long time, since the first firm is not in an optimal position. She will decide to reduce the volume of production, focusing on the market share free from the second firm (75%), and the firm will set the volume of production corresponding to 50% of the free share. The decrease in the production volume of the first firm creates conditions for the expansion of the production of the second firm. This process will continue until each firm produces 33.3% of the total market. Such a situation will characterize the establishment of equilibrium in the market and guarantee maximum revenue for each firm.

In the 30s of the twentieth century. German economist G. von Stackelberg Considered a duopoly market in which one firm is larger than the other. He came to the conclusion that equilibrium can be in the case of an asymmetric duopoly, since in this case a large firm tries to achieve a position of independence and independently sets the price, while the other firm simultaneously tries to achieve a position of dependence, to adapt to the conditions of sale in such a market. The adjustment process can be illustrated through reaction curves (Figure 7.11). In this case, the dominant firm chooses the most vantage point on the reaction curve, and the subordinate firm shows a Cournot-type reaction curve. G. von Shtakkelberg concluded that the duopoly is an unstable form of market organization.

Rice. 6.2

As already noted, the oligopoly market is characterized by the absence of price competition and the stability of the price level. This situation is reflected in broken demand curve models .

According to this model, if an equilibrium price has formed in the oligopoly market, then firms are not interested in changing this price, since in any case they incur losses. If one firm decides to increase the price, other firms will leave the price unchanged. As a result, the firm that raised the price will lose a large number of buyers, demand will be elastic, and, consequently, the firm will reduce revenue and profit. If a firm lowers the price of its product, then other firms are likely to lower the price as well. As a result, the expansion of sales volume will be insignificant and, consequently, the company's revenue and profit will decrease. Thus, any deviation of the price from the equilibrium leads to a reduction in profits and revenues of the firm.

Rice. 6.3

This theory also explains why firms in an oligopoly market keep prices constant even when production costs change.

In the 60s. American economists Efroimson and P. Sweezy developed a model of a broken demand curve, which explains the upward trend in the price level during the period of economic growth.

Rice. 6.4

During the period of economic growth, the volume of production and incomes of the population increase. Therefore, the company raises the price, hoping that the growth in incomes of the population will allow selling products at higher prices. The decrease in sales will be insignificant (inelastic demand) as buyers' incomes have increased. As a result, the company increased its sales revenue. If a firm lowers the price of its product, other firms are likely to leave the price unchanged, expecting that there will always be buyers willing to pay the same price for the product offered. As a result, the firm that reduces the price will significantly expand the volume of sales of products and income. Comparing the two options, the company's management comes to the conclusion that it is more profitable to raise prices, since no additional efforts are required to expand production.

In the oligopoly market, there are a large number of different options for the behavior of firms and this leads to the use of mathematical models that describe the behavior of competitors in the market and allow you to choose the optimal course of action. In particular, it is used game theory - a section of applied mathematics, with the help of which the optimal strategy of the subject's behavior in conflict situations is established, which is understood as a situation of conflict of interests of two or more parties pursuing different goals. Each of the participants in the conflict can have some influence on the course of events, but does not have the ability to fully control it.

The mathematical model should describe:

Multiple stakeholders;

Possible actions for each side

The interests of the parties, represented by payoff functions for each of the players.

In game theory, it is assumed that the payoff functions and the set of strategies available to each of the players are well known. Games are classified based on one principle or another. The decision model gives managers a decision matrix on which to base their decision. The choice of solution depends on the nature of the manager:

Criterion maximax (optimism)

Criterion maximin (pessimism)

criterion of indifference.

Most often, the pessimistic option is chosen, since it is assumed that the opponent is a qualified specialist who chooses the best solutions.

Suppose we have two firms (A and B) and two behavioral strategies are possible: firm A: lower the price or leave the price unchanged.

Since the competitor will take some kind of retaliatory action, 4 situations may arise in the market:

1) firm A lowers the price, firm B leaves the price unchanged;

2) firm A leaves the price unchanged, firm B lowers the price;

3) firm A lowers the price, firm B lowers the price;

4) firm A leaves the price unchanged, firm B leaves the price unchanged.

The economic outcomes of each situation for firms are presented in tabular form.

Table 6.1 - Decision matrix

Firm A's decision will depend on the chosen strategy. One such strategy is the loss minimization strategy. In this case, the firm evaluates the possible losses for each strategy and chooses the strategy that brings the least losses. In our case, firm A's management will lower the price.

The oligopoly market is characterized by a wide variety of behaviors that, in a particular account, are oriented towards maximizing profits. In modern literature, works appear that state that large firms do not set the goal of their behavior to maximize profits, but to achieve other results: increasing sales, maintaining market share, conquering new markets, and so on. All this complicates the analysis of the oligopoly market.

Properties of an oligopoly

Market dominance by a small number of sellers oligopolists
Very high barriers to entry into the industry
An oligopolistic firm does not need to produce differentiated products to survive in the long run.
The decision of each firm affects the situation on the market, and at the same time depends on the decisions of other firms: when making a decision, the oligopolistic firm takes into account the possible reaction of other market participants. For this reason, in an oligopolistic market, the possibility of collusion is very high.
A small number of goods-substitutes for the products of oligopolists
An oligopolist can be both a price maker and a price taker in the market
As a quantitative description of this form, the following ratio can be used - the share of the four leading firms in the industry should be more than 40%.

Universal Interdependence

Since there are few firms in the market, sellers need to develop growth strategies for their firm so that they are not forced out of the market by competitors. Since there are few firms in the market, companies closely monitor the actions of competitors, including their pricing policy, with whom they cooperate, etc.

Broken demand curve model: point P(none) - if the firm sets the price of the product above this level, then competitors will not follow it

Price policy

The pricing policy of an oligopolistic company plays a huge role in her life. As a rule, it is not profitable for a firm to increase the prices of its goods and services, since it is likely that other firms will not follow the first one, and consumers will "pass" to a rival company. If the company lowers the prices of its products, then in order not to lose customers, competitors usually follow the company that lowered prices, also reducing the prices of the goods they offer: there is a “race for the leader”. Thus, so-called price wars often occur between oligopolists, in which firms set a price for their products that is no higher than that of a leading competitor. Price wars are often detrimental to companies, especially those that compete with more powerful and larger firms.

Cooperation with other companies

Some oligopolists act according to the principle "don't have a hundred rubles, but have a hundred friends." Thus, firms enter into partnerships with competitors such as alliances, mergers, conspiracies, cartels. For example, the air transportation oligopolist, Aeroflot, in 2006 entered into the Sky Team alliance with other global airlines, the oil-producing countries united in OPEC, often recognized as a cartel. An example of a merger between two companies is the merger of Air France and KLM. By uniting, firms become more powerful in the market, which allows them to increase output, change the price of their goods more freely and maximize their profits.

Game theory

Theories of oligopolistic pricing

To model the behavior of firms participating in the market in the theory of oligopoly, methods of game theory are used. The most famous oligopoly models are:

Gutenberg model
Edgeworth model

Organizational and economic forms of concentration

Cartel - a form of association, a public or tacit agreement between a group of enterprises with similar profiles on sales volumes, prices and markets;
Syndicate - a form of association of enterprises producing homogeneous products, organizes collective sales through a single trading network;
A trust is a form of association in which the participants lose their production and financial independence.
Consortium - a temporary association of enterprises on the basis of a common agreement for the implementation of a project;
A conglomerate is an association of diversified firms. A high degree of autonomy and decentralization of management is usually maintained;
Holding - a parent company that controls the activities of other companies, may not be engaged in production activities;
A concern is an association of enterprises bound by common interests.

In the vast majority of countries in the world, the processes of business combinations are controlled by antitrust laws.

Notes

Literature

Nureev R. M., "Course of Microeconomics", ed. "Norma", 2005
F. Musgrave, E. Kacapyr; Barron's AP Micro/Macroeconomics

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See what "Oligopoly" is in other dictionaries:

oligopoly- a market situation in which a small number of fairly large sellers opposes a mass of relatively small buyers, and each seller accounts for a significant part of the total supply on the market. Dictionary financial terms.… … Financial vocabulary

Oligopoly- (oligopoly) A market in which a relatively small number of sellers serve many buyers. Every seller is aware that he can control his prices up to a certain level and that his profits will be affected by the behavior of his competitors... Glossary of business terms

oligopoly- (oligopoly) A situation in the market where there are several sellers, each of which evaluates the behavior of others. Each firm controls a fairly significant portion of the market, given the individual reaction of other market participants to reduce their ... ... Economic dictionary

oligopoly- [Dictionary of foreign words of the Russian language

oligopoly- The state of the commodity market, in which a very limited number of operators, as a rule, large corporations, operate on it. Automotive markets are almost oligopolistic in all countries, since the number of car manufacturers is very ... ... Technical Translator's Handbook

oligopoly- (from oligo ... and the Greek poleo I sell, trade), a type of market structure of the economy, in which several large firms, companies provide the overwhelming share of industry production and marketing of products ... Modern Encyclopedia

oligopoly- (from oligo ... and Greek poleo I sell I trade), a term denoting a market situation when several large competing firms monopolize the production and marketing of the bulk of products in the industry ... Big Encyclopedic Dictionary

oligopoly- (from Greek oligos small and poleo I sell) eng. oligopoly; German Oligopol. A type of market structure in which a few large competing firms monopolize the sale of the bulk of products in a given industry. see MONOPOLY. Antinazi. Encyclopedia ... Encyclopedia of Sociology

oligopoly- (oligopoly) A market in which there are few sellers, as a result of which they can control the prices and quality of the goods offered through collusion or a game-theoretic strategy. Most political markets, such as those where political parties… … Political science. Dictionary.

Oligopoly- the situation on the market (market structure), when a small number of product sellers (firms) operate. Its peculiarity is that here each of the competing firms is able to influence the price of products offered by other firms, and ... ... Economic and Mathematical Dictionary

oligopoly market - this is a form of market organization in which several large firms operate on the market, producing a homogeneous or differentiating product, and independently setting the price for their products, taking into account the possible reaction of competitors. An oligopoly exists only when the number of firms is so small that each of them must take into account the reaction of competitors when formulating its pricing policy.

The oligopoly market is a typical form of modern market organization. An example of an oligopoly market with a homogeneous product is the market for potash fertilizers. The car market is a typical oligopoly market with a differentiated product.

The oligopoly market is characterized by the following traits :

1. there are several large firms;

2. the share of each firm in the market is significant;

3. each firm independently sets the price, taking into account the possible reaction of competitors;

4. there are obstacles to entry into the market of new firms (natural and artificial);

5. non-price competition prevails, which happens

subject (between the same goods with different quality characteristics: cars),

specific (between different products that satisfy the same need: juices, mineral water, etc.)

functional (between goods that satisfy different needs: food production and clothing production).

oligopoly market arises for the following reasons:

1. the effect of patents on scientific discoveries and inventions;

2. control over scarce resources;

3. the effect of economies of scale in production;

4. privileges from the state;

5. price and non-price competition, the use of non-economic methods of competition.

1) At. Fellner, which highlights:

The market is in the conditions of maximizing the profit of the industry;

Market in conditions of fundamental antagonism.

2) F. Mahlupu, which highlights:

The market is fully coordinated;

A market partly coordinated by:

a) a leading company

b) voluntary cooperation;

A market without coordination of actions, which can be represented as:

a) a price war

b) pursuing an aggressive trade policy;

c) chain oligopoly.

3)according to the degree of antagonism

Market at war;

The market is in a state of truce;

The market is at peace.

Thus, there are several possible situations in the market:

a) price wars between firms;

b) price stability in the conduct of non-price competition;

c) agreements on prices and volumes of production, official or implicit;

d) predictable behavior of firms.

7.6.2. Oligopoly market in the absence of collusion

If firms compete on price, then the oligopoly market is similar to the perfectly competitive market and is described by the corresponding models. This situation is quite rare, since large firms can compete on price for a long time due to their large financial capabilities, which can lead to large financial losses.

One of the first models of the oligopoly market is the model of the duopoly market, that is, the market in which two firms operate. It was proposed in the 40s of the nineteenth century. O. Kurno .he suggested , that there are two firms that are the same size. These firms experience constant economies of scale, that is, when the volume of production changes, the average cost, and hence the price, does not change. Each firm decides on the volume of production independently, focusing on the free market share. As we already know, the firm achieves maximum sales revenue provided that the price elasticity of demand is equal to one. This state is achieved if the firm produces a volume of products that satisfies half the needs of the market. Therefore, if there is one firm on the market, then it will produce products in the amount of 50% of the market capacity, since in this case the maximum revenue is provided (Fig. 711.a). If the second firm enters this market, then it will focus on the market share not occupied by the first firm and will produce 50% of this share, i.e. 25% of the market volume (Fig.7.11.b).

a) one firm in the market b) the appearance of a second firm c) the reaction of the 1st firm d) the final equilibrium

Rice. 7.11 Cournot duopoly market

This situation cannot persist for a long time, since the first firm is not in an optimal position. She will decide to reduce the volume of production, focusing on the market share free from the second firm (75%), and the firm will set the volume of production corresponding to 50% of the free share, that is, 37.5% of the total market demand (Fig. 7.11.c) . The decrease in the production volume of the first firm creates conditions for the expansion of the production of the second firm. This adjustment process will continue until each firm produces 33.3% of the total market (Fig.7.11.d). Such a situation will characterize the establishment of a stable equilibrium in the market, as it guarantees each firm maximum revenue.

In the 30s of the twentieth century. German economist G. von Stackelberg considered a duopoly market in which one firm is larger than the other (asymmetric duopoly).

He came to the conclusion that equilibrium can be established, since in this case a large firm, being a leader, is trying to achieve a position of independence and independently sets the price, while another, smaller, firm, being an outsider, at the same time tries to achieve a position of dependence, to adapt to terms of sale in that market. The smaller firm is actually a price-taking firm, acting in the same way as a firm with a perfect competitor. The adjustment process can be illustrated through reaction curves (Figure 7.12). In this case, the dominant firm chooses the most favorable point on the reaction curve, and the subordinate firm shows a Cournot-type reaction curve. G. von Shtakkelberg concluded that an asymmetric duopoly is an unstable form of market organization.

Figure 7.12 Stackelberg duopoly market

As already noted, the oligopoly market is characterized by the absence of price competition and the stability of the price level. This situation is reflected in broken demand curve models (Fig.7.13).

Figure 7.13 Broken demand curve model

According to this model, if an equilibrium price has formed in the oligopoly market, then firms are not interested in changing this price, since in any case they incur losses in the long run.

If one firm decides to increase the price, other firms are likely to leave the price unchanged. As a result, the firm that raised the price will lose a large number of buyers, since demand will be elastic, and, consequently, the firm will reduce revenue and profit. If a firm lowers the price of its product, then other firms are likely to lower the price as well. As a result, the expansion of sales volume will be insignificant (demand will be price inelastic), does not compensate for the losses associated with the price reduction, and, consequently, the company's revenue and profit will decrease. Thus, any deviation of the price from the equilibrium leads to a reduction in the firm's revenue and profit.

This theory also explains why firms in an oligopoly market keep prices the same even if production costs change.

In the 60s. American economists Efroimson and P. Sweezy developed a kinked demand curve model that explains the upward trend in the price level during a period of economic growth (Figure 7.14).

Fig. 7.14 Model of a broken demand curve in the context of economic growth

During the period of economic growth, the volume of production and incomes of the population increase. Therefore, the company raises the price, hoping that the growth in incomes of the population will allow selling products at higher prices. The decrease in sales will be small (inelastic demand) because buyers' incomes have increased and they can afford to buy the product at a higher price. Due to this, the company will increase the revenue from the sale of products. If a firm lowers the price of its product, other firms are likely to leave the price unchanged, believing that with increased income there will always be buyers willing to pay the same price for the product offered. As a result, the firm that reduces the price will significantly expand the volume of sales of products and income. Comparing the two options, the company's management comes to the conclusion that it is more profitable to raise prices, since no additional efforts are required to expand production.

In the oligopoly market, there are a large number of different options for the behavior of firms, and this leads to the use of simulation mathematical models that allow you to describe the behavior of competitors in the market and choose the optimal course of action. In particular, it is used game theory - a section of applied mathematics, with the help of which the optimal strategy for the behavior of a subject in conflict situations is established, which is understood as a situation of a conflict of interests of two or more parties pursuing different goals. Each of the participants in the conflict can have some influence on the course of events, but does not have the ability to fully control it.

The mathematical model should describe:

Multiple stakeholders;

Possible actions of each party;

The interests of the parties, represented by payoff functions for each player.

In game theory, it is assumed that the payoff functions and the set of strategies available to each player are well known.

Games are classified based on one principle or another.

By way of interaction they can be cooperative if firms cooperate in making decisions, or non-cooperative if firms compete with each other.

By type of win games are zero-sum, when one player's gain is equal to the other's loss, and constant difference, when all players win or lose at the same time.

The decision of the model provides managers with a decision matrix that reflects the payoffs for all possible strategies and situations. Based on the matrix, they must make a decision. The choice of solution depends on the nature of the manager. Allocate solutions for:

Criterion maximax (optimism), i.e. the manager focuses on the maximum gain;

Criterion maximin (pessimism), i.e. the manager seeks to choose a behavior strategy that minimizes losses;

Indifference criterion (focus on the maximum average result for the best strategy).

Most often, the pessimistic option is chosen, since it is assumed that the opponent is a qualified specialist who chooses the best solutions.

Suppose we have two firms ( A And IN) having the same volume of sales in the market and two strategies of the firm's behavior are possible A: raise the price of products or leave the price unchanged (Table 7.1).

Since a competitor will take retaliatory action, one of four situations can occur in the market:

1) firm A raises the price, firm IN leaves the price unchanged;

2) firm A IN raises the price;

3) firm A raises the price, firm IN raises the price;

4) firm A leaves the price unchanged IN leaves the price unchanged.

Assume that the loss in case of a price increase by the firm A in our case will amount to 10,000 cu, since part of the buyers will start buying goods from the company IN which does not raise the price. If the firm IN will also increase the price, then the losses of each firm will amount to 5000 USD. The economic outcomes of each situation for firms are presented in tabular form.

Table 7.1

Decision Matrix

				Firm B's minimum loss for each strategy
		The price is rising	Price does not change	Firm B's minimum loss for each strategy
		Firm A incurs a loss of $5,000. Firm B incurs a loss of $5,000.	A bears losses in the amount of 10,000 USD. B makes a profit of $10,000.
	Price does not change	Firm A makes a profit of $10,000. Firm B incurs a loss of $10,000.	Firm A's earnings do not change. Firm B's earnings do not change.
Firm A's minimum loss for each strategy

Firm decision A will depend on the chosen strategy. One such strategy is the loss minimization strategy. In this case, the company's management evaluates the possible losses for each strategy and chooses the strategy that brings the least losses. In our case, the management A will raise the price, assuming that the firm IN will also raise the price.

If the firms coordinated their actions (cooperative game), then the prices in the market would remain unchanged. Studies have shown that if the payoffs of the players are asymmetric, then there are inevitably elements of cooperation in the choice of strategies.

The oligopoly market, as we have already noted, is characterized by a wide variety of behaviors that, ultimately, are oriented towards maximizing profits. In modern economic literature, works appear that state that large firms set as the goal of their behavior not to maximize profits, but to achieve other results: increasing sales, maintaining market share, conquering new markets, and so on. All this complicates the analysis of the oligopoly market and expands the scope of application of simulation modeling in the practice of making managerial decisions.

The main features of the oligopolistic market

Oligopoly is one of the most common market structures in

modern economy. In most countries, almost all branches of heavy

industries (metallurgy, chemistry, automotive, electronics, shipbuilding and aircraft building, etc.) have just such a structure.

1. Oligopoly is a market structure in which there are a small number of selling firms on the market for a product, each of which occupies a significant market share and has significant price control. However, one should not think that companies can literally be counted on the fingers. In an oligopolistic industry, as in monopolistic competition, there are often many small firms along with large ones. However, a few leading companies account for such a large part of the industry's total turnover that it is their activities that determine the course of events.

Formally, oligopolistic industries usually include those industries where several

largest firms (in different countries from 3 to 8 firms are taken as a reference point)

produce more than half of all manufactured products

The main reason for the formation of an oligopoly is economies of scale.. An industry acquires an oligopolistic structure if the large size of the firm provides significant cost savings and, therefore, if large firms in it have significant advantages over small ones.

Oligopoly is characteristic of many industries in Russia. Thus, passenger cars are produced by five enterprises (VAZ, AZLK, GAZ, UAZ, Izhmash). Dynamic steel is produced by three enterprises, 82% of tires for agricultural machines - by four, 92% of soda ash - by three, the entire production of magnetic tape is concentrated in two enterprises, motor graders - in three.

2. Products in an oligopolistic market can be either homogeneous,

standardized (copper, zinc, steel) and differentiated

(cars, household electrical appliances). The degree of differentiation affects the nature of competition.

3. An important condition affecting the nature of individual markets is the height of the barriers that protect the industry (the amount of initial capital, the control of existing firms over new technology And latest products with the help of patents and technical secrets, etc.).

4. There are significant limitations in the availability of economic information in this market structure. Each market participant carefully guards trade secrets from its competitors.

5.Special economic policy of oligopolists. if a few oligopolists start holding general policy, then their joint market power will come close to that possessed by a monopoly.

Competitors may react to this in different ways. First, they can

reduce prices by less than 15%. In this case, this firm will increase the market

sales. Secondly, competitors can also reduce prices by 15%. Volume

sales will increase for all firms, but due to lower prices, profits may

decrease. Thirdly, a competitor may declare a “price war”, i.e. reduce

prices still in more. The question then becomes whether to accept his challenge.

Usually in a "price war" among themselves large companies do not enter, because

the outcome is difficult to predict.

6. Very strong Oligopolistic interdependence - the need to take into account the reaction of competing firms to actions large firm in an oligopolistic market.

Any model of an oligopoly must proceed from taking into account the actions of competitors. This is an additional significant limitation that must be followed

take into account when choosing a scheme of behavior for an oligopolistic firm.

That's why standard model there is no definition of the optimal volume of production and the price of products for an oligopoly. It can be said that determining the pricing policy of an oligopolist is not only a science, but also an art.

Varieties of oligopoly

The oligopolistic structure can be very different, each of its

the variety leaves an imprint on the development of the pricing policy of the company.

Uncoordinated oligopoly, in which firms do not enter into any contacts with each other and do not consciously try to find a point of equilibrium that suits everyone. Duapoly.

Cartel (or collusion) of firms, not liquidating their production and

marketing independence, but providing for an agreement between them on a number of issues. First of all, cartel agreements include uniform, monopolistically high prices at which cartel members undertake to sell their goods on the market.

The cartel agreement also provides division of the sales market. This

means that each member of the cartel undertakes to sell their goods,

for example, only in certain areas.

In addition, in order to be able keep prices high, often

the supply of goods on the market is limited, and this requires limiting

production sizes. Therefore, cartel agreements often provide for the determination of the share in the production of various goods for each member of the cartel.

Collusion can be both secret and legal. In many European countries cartels are allowed, in Russia and the USA they are prohibited by law.

Let's assume that the firms - members of the cartel - decided to set a single price for their products. To do this, it is necessary to construct a marginal cost curve for the cartel as a whole. Then it is possible to determine the optimal volume of production in the cartel, which allows maximizing the total profit. (MC = MR) But the most difficult problem is

distribution of sales volume between the participants of the cartel agreement.

In an effort to maximize profits, the cartel must set quotas in such a way that the total costs are minimal. But in practice, it is rather difficult to implement such an establishment of quotas. The problem is solved by conducting complex negotiations, during which each firm seeks to

"trade" for yourself best conditions, outwit partners. In fact, markets are usually divided geographically or according to the prevailing volume of sales.

The creation of cartels runs into serious obstacles. It's not only

antitrust laws. Agreements are often difficult to reach

due to the large number of firms, a significant difference in the nomenclature

products, cost levels. Usually a cartel member is tempted to

break the agreement and get a big profit.

By virtue of a legal ban, cartels in modern Russia does not exist. However, the practice of one-time price collusion is very widespread. It suffices to recall how periodically there is a shortage of either butter or sunflower oil, or gasoline on the consumer market.

Cartel-like market structure(or "play by the rules"), in which

firms deliberately make their behavior understandable and predictable for

competitors, thereby facilitating the achievement of equilibrium in the industry or a state close to it.

Firms do not enter into agreements with each other, but subordinate their behavior

certain unwritten rules. On the one hand, this policy avoids legal responsibility arising from anti-cartel legislation. And on the other hand, to reduce the risk of unpredictable reactions of competitors, i.е. protect yourself from the main danger inherent in an uncoordinated oligopoly. "Playing by the rules" facilitates the achievement of oligopolistic equilibrium.

The most commonly used technique of "playing by the rules" is price leadership. It consists in the fact that all large price changes are first carried out by one firm (usually the largest), and then they are repeated in similar sizes by other companies. The price leader actually single-handedly determines prices (and hence the volume of production) for the entire industry. But he does it in such a way that the new prices suit the rest.