Most closely corresponds to the concept of oligopoly. Oligopoly. How does oligopoly manifest itself in the mobile operator market?

From this article you will learn:

Monopoly, by preventing competition and suppressing it, acts in the opposite direction. To avoid negative consequences monopolism, interferes with 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 penalties in case of violation of antitrust laws. There are cases when a company that is found to be systematically using unfair competition methods and loses a lawsuit is subject to direct dissolution.

The organizational mechanism of antimonopoly regulation is aimed at preventing monopoly by preventive methods. Without affecting monopoly as a form of production, the methods and methods of such state policies are aimed at making monopolistic behavior for big business unprofitable. Among these methods we can highlight regulation customs duties, abolition of quantitative quotas, support for small businesses, simplification of licensing procedures, optimization of production, the products of which can compete with the goods of monopolies, etc.

The most effective and developed form government regulation monopoly power is antitrust legislation.

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

Antitrust laws outlaw price discrimination against customers when such discrimination is not justified by differences in costs. Antitrust laws prohibit the acquisition of shares of competing corporations if doing so would lessen competition. Laws prohibit secret conspiracies aimed at restricting production or trade, and attempts to monopolize any part of production or trade are declared criminal.

To protect the rights of consumers from monopolistic activities and the development of competition, the legislation prohibits: limiting or stopping the production of goods, as well as the production and supply of raw materials, materials, 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 increase prices. It is prohibited to force the consumer to include unnecessary goods in the subject of the contract, or to impose other preliminary discriminatory conditions, and it is prohibited to stop or delay the supply of goods or the performance of services in response to the buyer’s complaints about the quality of the goods.

Antimonopoly legislation establishes forms of warning, liability and compensation in the event of prohibited actions.

In order to limit monopolistic activities and encourage competition in countries with market economies, state antimonopoly authorities are created. In the United States, antitrust regulation is carried out by the antitrust department of the Department of Justice and the Federal trade company, in Japan - the Fair Trading Commission, in France - the Competition Council. In 1992, the Republic of Belarus adopted a law on combating monopolistic activities 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 on the market is an imperfect substitute for the product sold by other firms.
2. There are a relatively large number of sellers in a market, each of whom satisfies 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 do not take into account the reaction of their rivals when choosing what price to set for their goods or when choosing targets for annual sales.
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 categories similar to the industry.

A product group consists of several closely related but not identical products that satisfy the same customer need. Within each product group, sellers can be viewed as competing firms within an 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 appropriate decisions must be made. However, when describing an industry, a cross-sectional estimate for the products of rival firms may be useful, since in an industry with monopolistic competition cross demand on the goods of rival firms should be positive and relatively large, which means that the goods of competing firms are very good substitutes for each other, which means that if the firm raises its price above the competitive price, it can expect to lose a significant amount of sales to its competitors.

Typically, in the most monopolistically competitive markets, the four largest firms account for 25% of total domestic supplies, and the eight largest firms account for less than 50%.

An oligopoly is a market structure in which very few sellers dominate the sale of a good and the entry of new sellers is difficult or impossible. Products 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 a product's total sales.

In oligopolistic markets, at least some firms can influence price due to their large shares of total output. Sellers at oligopolistic market know that when they or their rivals change prices or sales volume, the consequences will affect the profits of all firms in the market. Sellers are aware of their interdependence. Each firm in the industry is expected to recognize that a change in its price or output will cause a reaction from other firms. The response that any seller expects from rival firms in response to changes in his price, output, or changes in marketing activities is a major factor determining his decisions. The response that individual sellers expect from their rivals influences the equilibrium in oligopolistic markets.

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

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

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

In oligopolistic markets, individual firms consider the possible reactions of their competitors before they begin advertising and undertake other promotional expenditures. An oligopolistic firm can significantly increase its market share through advertising only if rival firms do not retaliate by starting their own advertising campaigns.

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 launch advertising campaigns or not. If firms do not start advertising campaigns, 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 are chasing profits and both end up with losses. This happens because everyone chooses the strategy with the least losses. If they had agreed not to advertise, they would have made large profits.

There is also evidence that oligopolistic markets advertise on a larger scale than is necessary to maximize profits. Often, advertising by competing companies 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 increases profits. They indicate that the higher the proportion of advertising expenditures relative to industry sales, the higher the industry profit margin. And because Higher profit margins indicate monopoly power, which implies that advertising leads to greater price control. It is unclear, however, whether higher advertising expenditures lead to higher profits or whether higher profits cause higher advertising expenditures.

Other models of oligopoly

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

Oligopoly conditions

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

Let's take the automotive industry as an example. This is the industry industrial production very convenient 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 will talk 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 - when there is a limited number of producers - one of them has a significant influence on the rest.

Due to the size of the above-mentioned automobile companies and the similarity of the product they produce, the actions that any of them may take in the market will have completely different consequences than in other market models. As a result, the entire market may be distorted.

Suppose Ford Motors decides to lower prices to gain additional market share. Of course, the standard demand curve shows that if you lower the price of a product, you can expect an increase in market share.

In Fig. the top of the broken demand line is shown to decline to the right until the point at which Ford decides to reduce the price (the curve breaks off and continues to decline from a lower level to a certain point determined by the market).

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

It seems logical that three automobile manufacturers would gather for a business meeting and agree on price levels, production volumes, and other marketing aspects of their activities. However, in the United States, such meetings are prohibited by law, which classifies them as conspiracy. There are three types of collusion. The first is explicit (open), as in the example given. Manufacturers openly gather to discuss price levels, which everyone knows about.

In some countries this is considered illegal, but in others and in some industries it is even encouraged. In each country, the legal position on this issue is different. Another type of collusion is secret: the producers hold a secret meeting, hidden from public view, and the decisions made are usually not disclosed to either the public or the authorities. Conspiracies 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, the Ford Motor Company will never decide to reduce prices, realizing that this will lead to a loss of profit throughout the entire automobile industry. This type of conspiracy is not illegal, mainly because its existence cannot be proven. In fact, if someone, based on his own interests, acts in the market according to all known rules, then this will not contradict the laws.

The marketing manager's understanding of the fact that it is necessary to compete with other companies on a basis other than price is a marketing imperative in an oligopoly market. As a consequence of this understanding, the automobile industry faces fierce competition between manufacturers in the areas of safety, fuel efficiency, style, and luxury design. car showroom and the use of advanced technologies, which is more productive and beneficial for society as a whole.

So, since oligopolists know well what benefits them, they act in a coordinated manner, and usually the result 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 complaint about oligopolies is that they are so powerful 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 in the automotive industry. For example, the automobile giants of Japan, Germany and the United States have been cooperating for some time in the production of cars.

Monopoly oligopoly

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

A market with monopolistic competition is characterized by the following:

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

Each seller's product has exceptional qualities and characteristics that cause some buyers to choose his product over a competitor's product. Product differentiation means that the item sold in the market is not standardized. This may occur because of actual qualitative differences between products or because of perceived differences that arise from differences in advertising, brand prestige or the “image” associated with owning the product.

2. There are a relatively large number of sellers in the market, each of whom 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 market shares of firms generally exceed 1%, i.e. that is, the percentage that would exist under perfect competition. Typically, a firm accounts for 1% to 10% of market sales during the year. 3. Sellers in the market do not take into account the reaction of their rivals when choosing what price to set for their goods or when choosing guidelines for annual sales.

This feature is a consequence of the relatively large number of sellers in a market with monopolistic competition. Those. If an individual seller cuts his price, it is likely that the increase in sales will not come at the expense of one firm, but at the expense of many. As a consequence, it is unlikely that any single competitor will incur a significant loss of market share due to a reduction in the selling price of any single firm. Consequently, competitors have no reason to respond by changing their policies, 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 consider any possible reaction from competitors 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 company or leave the market. Favorable conditions in a market with monopolistic competition will attract new sellers. However, entry into the market is not as easy as it was under perfect competition, since new sellers often have difficulty introducing brands and services that are new to customers. Consequently, established firms with established reputations can maintain their advantage over new producers. Monopolistic competition is similar to a monopoly situation because individual firms have the ability to control the price of their goods. It is also similar to perfect competition because Each product is sold by many firms, and there is free entry and exit in the market.

Existence of an industry under monopolistic competition

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

However, when describing an industry, it may be useful to estimate the cross-elasticity of demand for goods of rival firms, since in an industry with monopolistic competition, the cross elasticity of demand for the goods of rival firms should be positive and relatively large, which means that the goods of competing firms are very good substitutes for each other, which means that if the firm raises its price above the competitive price, then it can expect a loss significant sales volume in favor of competitors.

Typically, in the most monopolistically competitive markets, the four largest firms account for 25% of total domestic supplies, and the eight largest firms account for less than 50%.

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

In oligopolistic markets, at least some firms can influence price due to their large shares of the total quantity of goods produced. Sellers in an oligopolistic market know that when they or their rivals change prices or output, the consequences will affect the profits of all firms in the market. Sellers are aware of their interdependence. Each firm in the industry is expected to recognize that a change in its price or output will cause a reaction from other firms. The response that any seller expects from rival firms in response to changes in his price, output, or changes in marketing activities is a major factor determining his decisions. The response that individual sellers expect from their rivals influences 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 on the market.

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

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

Oligopoly models

Model of oligopoly based on collusion. In an oligopolistic market, each firm has a choice between cooperative () and non-cooperative (non-cooperative) behavior. In the first case, firms are not bound in their behavior by any explicit or secret agreements with each other. It is this strategy that gives rise to price wars. Firms adopt 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 are colluding. This concept is used in cases where two or more firms have jointly set fixed prices or output volumes and divided the market or decided to do business together.

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

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

Cartels are illegal in the United States. However, firms often succumb to the temptation to enter into secret collusion, which provides an opportunity to protect themselves from competition without resorting to open agreement. from the conspiracy, if it was successful, can be enormous.

The most famous international cartel is the Organization of the Petroleum Exporting Countries (OPEC) cartel, formed in I960. 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 successfully controlled crude oil exports. But by the mid-80s. There was a glut 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 profits, while other firms follow the leader. Rival firms charge the same price as the leader.

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

Price leadership has the nature of hidden collusion, since open agreements on prices are prohibited by antimonopoly legislation. Price leadership has an advantage over a cartel because it preserves the freedom of firms regarding their production and marketing activities, whereas in cartels they are regulated by quotas and/or market demarcation.

There are two main types of price leadership:

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

There is a market model of a dominant firm with a competitive environment and closed entry and with 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 the entry of additional sellers, are the sole producers of a standardized good that has no close substitutes. Economic models of duopoly 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 two sellers assumes that its competitor will always keep its output constant at its current level. The Cournot model assumes that salespeople 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.

Specific behavior of oligopolists in the market

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

Because of this, the oligopolist:

Cannot treat the demand curve for its products as given;
does not have a given marginal revenue curve (just like demand, MR varies depending on the behavior of the firm itself and its competitors);
does not have a clear equilibrium point (similar to what exists with perfect competition or with a pure monopoly);
cannot use the equality 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 different models of oligopoly. Only taken as a whole can these models provide a reliable picture of an oligopoly 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 mutual behavior by colluding or coordinating their actions in some other way.

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

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

Examples of oligopoly

The example of electrical engineering - one of the most important branches of modern industry - shows the consequences for the economy of the dominance of cartels.

As you know, electrical engineering arose at the beginning of our century immediately as a branch of mass production. A few large producers tried to agree on 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 created in Geneva. Its participants were Osram (Germany), Philips (Holland), General Electric (Great Britain) and others. In addition, both leading American manufacturers - General Electric and Westinghouse - also secretly joined it.

The whole world was divided into three regions:

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

Markets in national territories were reserved for local producers. This seemingly innocent condition actually meant the establishment of a monopoly there, which directly caused a sharp increase in prices. Thus, a 60-watt lamp in the USA, where there was competition with Japanese firms that were not part of Phoebus, cost 15 cents. 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 competitors, the consumer paid 48 and 70 cents. The maximum gap between monopoly and competitive prices was almost fivefold.

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

The fruits of monopolization were not long in coming: the cartel began to resort to such unprecedented methods of increasing profits that no company in an industry with strong competition would ever dare to undertake. Thus, cartel members were recommended to limit the service life of a light bulb to 1 thousand hours, although technology already existed that made it possible to increase it to 3 thousand. The calculation was simple: the faster the lamps burn out, the more new ones need to be bought to replace them. The chief coordinator of the cartel participants, J.M. Woodward, informed them that limiting the life of the lamps would allow sales to double in 5 years.

Another innovation of the Phoebus cartel, which by the way has survived to this day, was the standard it adopted, according to which lamps are labeled in watts rather than in lumens. Thus, when selling a lamp, the consumer is told a secondary characteristic of the product (how much energy the lamp consumes) and the main one (how much light it produces) is hidden.

The Phoebus Cartel did not survive the judicial investigation conducted by US antitrust authorities, which lasted from 1941 to 1949.

Scandalous revelations of collusion are periodically repeated not only in electrical engineering, but also in other industries up to the present day. There is no doubt that cartels have retained their attractiveness 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 one single firm (monopolist) produces a specific product with unique properties. Perfect competition and monopoly are two polar types of market structures.

Markets that are neither monopolistic nor perfectly competitive are covered 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 preconditions 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 obtained by the manufacturer as a result of product differentiation. Hence the incentive for differentiation;
thirdly, the sustainability of the clientele. If the price of a product increases, the firm does not lose all 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 demand curve elastic;
fourthly, ignoring rivals operating independently in the market;
fifthly, the absence of serious barriers to entry into the industry.

A monopolistically competitive firm largely exhibits the characteristics of a monopolist. The company produces such a quantity of goods that the equality of marginal income and marginal costs (MR - MC) is observed.

In the short term, the following rules apply:

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

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

In the long run, the firm's marginal revenue is equal to marginal costs: MR - MC (the firm maximizes profits) AND P = &4C (price is equal to long-term average costs: the firm receives normal profit).

When assessing 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 price exceeds marginal cost in equilibrium. Society would benefit if more goods were produced.
2. It is believed that in conditions of monopolistic competition, production does not occur at the minimum point of the long-term average cost curve. Firms do not take advantage of increased scale of production. Fewer firms producing more products independently would create products with lower average costs. However, having more firms means that consumers have a wider choice of products and spend less effort finding a seller.
3. The above 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 producers. Thus, it can shift the demand curve to the right and increase profits in the short run. Non-price competition assumes 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.

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 oligopoly include:

Interdependence (since there are few firms operating in the industry, each is concerned about the behavior of its rivals and, making its own decisions, tries to predict the next steps of its competitors);
- presence in 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 a product than to change its price).

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

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

The kinked 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 pricing decision depends on the predicted reaction of its rival. Generally, each firm's income is higher if the firms cooperate with other producers in the industry.

Collusion occurs when firms in a market coordinate their activities. Coordination takes many 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 by firms to respect the interests of oligopolistic firms in practice.

The functioning of cartel agreements depends on several factors: the number of firms in the industry (the more firms, the more likely it is that any firm will violate the agreement; by operating outside the cartel, a 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 their creation more difficult).

When the cartel achieves higher profit margins, new firms are attracted to the industry. They force existing producers to give them a production quota or market share, or they operate outside the cartel framework.

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

Price leadership is a practice in which one firm is allowed to change prices, and other manufacturers follow the leader in pricing.

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

When assessing the impact of an oligopoly on the economy, it is necessary to assume that this market structure has the advantage of economies of scale. The negative feature of this market structure is that prices are higher and production volumes 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, then 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 those where there is an oligopoly, one company can 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.

A price leader must take his role seriously and be careful when setting prices. The firm needs to have a good understanding of industry cost and demand parameters. If it is too aggressive in setting prices, it may attract unwanted attention from antitrust officials. IBM has drawn criticism for what it calls "temporary price cuts to force out a competitor," or aggressive pricing tactics. low prices, ruining its 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 pursue price leadership 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 the products, taking into account 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 forming its pricing policy. An oligopoly market is a typical form of organization of a modern market.

The oligopoly market is characterized by the following features :

1. there are several large companies;

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

3. each company sets its own 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 predominates, which can be substantive, specific and functional.

Oligopoly market arises for the following reasons:

1. validity of patents for scientific discoveries and inventions;

2. control over rare resources;

3. the effect of economies of scale;

4. privileges from the state;

5. consequences of competition.

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

A) Felner, who highlights:

Market in conditions of maximizing industry profits;

The market is in conditions of fundamental antagonism.

B) Makhlupa, who distinguishes:

The market is completely coordinated;

Market partially coordinated by

a) the leading company

b) voluntary cooperation;

Market without coordination of actions that can be represented

a) a price war;

b) pursuing an aggressive trade policy;

c) chain oligopoly.

B) according to the degree of antagonism

The market is at war;

The market is in a state of truce;

The market is at peace.

Thus, there may be several possible situations in the market:

a) price wars between firms;

b) price stability when conducting non-price competition;

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

d) predictable behavior of firms.

Oligopoly market in the absence of collusion

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

One of the first models of an oligopoly market is a duopoly market, that is, a market in which two firms operate. The first duopoly market model was proposed in the 40s of the nineteenth century. O.Cournot . He proposed that there are 2 firms of equal 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, do not change. Each company makes a decision on production volume independently, focusing on the free market share. If one company appears in such a market, then it will produce products in the amount of 50% of the market capacity, since in this case maximum revenue is ensured. If a second company enters this market, it will focus on the market share unoccupied by the first company and will produce 50% of this share.

Rice. 6.1

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

In the 30s of the twentieth century. German economist G. von Stackelberg looked at a duopoly market in which one firm is larger than the other. He came to the conclusion that equilibrium can exist in the case of an asymmetric duopoly, since in this case a large firm is trying to achieve a position of independence and sets its own price, while another firm is simultaneously trying to achieve a position of dependence and adapt to the conditions of sale in such a market. The adaptation process can be illustrated through response curves (Fig. 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 Stackelberg concluded that 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 stability of the price level. This situation is reflected in kinked demand curve models .

According to this model, if an equilibrium price has formed in an 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 of this, the company that raised the price will lose a large number of customers, demand will be elastic, and, consequently, the company will reduce revenue and profit. If a firm reduces the price of its products, other firms will most likely reduce their prices as well. As a result, the expansion in sales volume will be insignificant and, consequently, the company's revenue and profit will decrease. Thus, any deviation of the price from the equilibrium one leads to a reduction in the profit and revenue of the company.

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 tendency for the price level to increase during periods of economic growth.

Rice. 6.4

During a period of economic growth, the volume of production and income of the population increases. Therefore, the company raises the price, hoping that rising incomes will allow it to sell products at higher prices. The reduction in sales volume will be insignificant (inelastic demand), since the income of buyers has increased. Due to this, the company increased its revenue from product sales. If one company reduces the price of its products, then other companies will most likely leave the price unchanged, hoping that there will always be buyers willing to pay the same price for the products offered. As a result, the company that reduces the price will significantly increase its sales volume and income. Comparing the two options, the company's management comes to the conclusion that it is more profitable to increase prices, since no additional efforts are required to expand production.

In an 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 choosing the optimal course of action. In particular it is used game theory - a section of applied mathematics, with the help of which they establish the optimal strategy for the behavior of a subject in conflict situations, which is understood as a situation of conflict of interests of two or more parties pursuing different goals. Each of the parties to the conflict can have some influence on the course of events, but does not have the ability to completely control it.

The mathematical model should describe:

Multiple stakeholders;

Possible actions of each party

The interests of the parties are represented by the 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 publicly known. Games are classified based on one principle or another. Solving the model provides managers with a decision matrix upon which to make decisions. The choice of solution depends on the character of the manager:

maximax (optimism) criterion

Maximin (pessimism) criterion

Indifference criterion.

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

Let's assume that we have two firms (A and B) and two possible strategies of behavior: 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 results 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 company evaluates the possible losses for each strategy and chooses the strategy that brings the least losses. In our case, the management of company A will reduce the price.

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

Properties of Oligopoly

Domination of the market by a small number of sellers - oligopolists
Very high barriers to entry into the industry
An oligopoly 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, an oligopoly 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 substitute products for oligopolistic products
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 a small number of firms in the market, sellers need to develop development strategies for their firm so that they are not forced out of the market by competitors. Since there are few firms on the market, companies closely monitor the actions of competitors, including their pricing policy, with whom they cooperate, etc.

Broken demand curve model: point P (no) - if a firm sets the price for a product above a given level, then competitors will not follow it

Price policy

The pricing policy of an oligopolist company plays a huge role in its life. As a rule, it is not profitable for a firm to raise prices for its goods and services, since there is a high probability that other firms will not follow the first one, and consumers will “move” to a rival company. If a company lowers prices for its products, then, in order not to lose customers, competitors usually follow the company that lowered prices, also reducing prices for the goods they offer: a “race for the leader” occurs. 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 the leading competitor. Price wars can often be devastating for companies, especially those competing 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 cooperation with competitors, such as alliances, mergers, conspiracies, cartels. For example, the airline oligopolist Aeroflot entered into the Sky Team alliance with other global airlines in 2006, and oil-producing countries united in OPEC, often recognized as a cartel. An example of a merger of two companies is the merger of Air France and KLM airlines. By joining together, firms become more powerful in the market, which allows them to increase their output, change the prices of their goods more freely, and maximize their profits.

Game theory

Theories of oligopolistic pricing

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

Gutenberg model
Edgeworth model

Organizational and economic forms of concentration

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

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

Notes

Literature

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

Wikimedia Foundation. 2010.

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See what "Oligopoly" is in other dictionaries:

OLIGOPOLY- a situation on the market 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 Dictionary

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

OLIGOPOLY- (oligopoly) A situation in a market where there are several sellers, each of whom evaluates the behavior of others. Each firm controls a fairly significant part of the market, taking into account the individual reaction of other market participants to their reduction... ... Economic dictionary

OLIGOPOLY- [Dictionary of foreign words of the Russian language

oligopoly- The state of the commodity market in which there is a very limited number of operators, usually large corporations. Automotive markets are practically oligopolistic in all countries, since the number of car manufacturers is very... ... Technical Translator's Guide

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

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

OLIGOPOLY- (from the Greek oligos small and poleo I sell) English. oligopoly; German Oligopol. A type of market structure in which several 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 theoretical strategy. Most political markets, such as political parties… … Political science. Dictionary.

Oligopoly- a situation on the market (market structure), when there are a small number of product sellers (firms). 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 the product, 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 forming its pricing policy.

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

The oligopoly market is characterized by the following features :

1. there are several large companies;

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

3. each company sets its own price, taking into account the possible reaction of competitors;

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

5. non-price competition prevails, which happens

subject (between identical products 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. validity of patents for scientific discoveries and inventions;

2. control over rare resources;

3. the effect of economies of scale;

4. privileges from the state;

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

1) U. Fellner, which highlights:

Market in conditions of maximizing industry profits;

The market is in conditions of fundamental antagonism.

2) F. Makhlupu, which highlights:

The market is completely coordinated;

A market coordinated in part by:

a) the leading company

b) voluntary cooperation;

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

a) price war;

b) pursuing an aggressive trade policy;

c) chain oligopoly.

3)by degree of antagonism

The market is at war;

The market is in a state of truce;

The market is at peace.

Thus, there may be several possible situations in the market:

a) price wars between firms;

b) price stability when conducting non-price competition;

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

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 quite a long time due to their large financial capabilities, which can lead to large financial losses.

One of the first models of an oligopoly market is the model of a duopoly market, that is, a market in which two firms operate. It was proposed in the 40s of the nineteenth century. O.Cournot .He suggested , that there are two firms of equal 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, do not change. Each company makes a decision on production volume 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 company produces a volume of products that allows it to satisfy half of the market needs. Therefore, if there is one company in the market, then it will produce products in the amount of 50% of the market capacity, since in this case maximum revenue is ensured (Fig. 711.a). If a second company enters this market, it will focus on the market share unoccupied by the first company and will produce 50% of this share, i.e. 25% of the market volume (Fig. 7.11.b).

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

Rice. 7.11 Cournot duopoly market

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

In the 30s of the twentieth century. German economist G. von Stackelberg looked at 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, tries 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, adapt to conditions of sale in such a market. The smaller firm is actually a price-taking firm and acts similarly to a perfect competitor. The adaptation process can be illustrated through response curves (Fig. 7.12). In this case, the dominant firm chooses the most advantageous point on the reaction curve, and the subordinate firm shows a Cournot type reaction curve. G. von Stackelberg concluded that an asymmetric duopoly is an unstable form of market organization.

Fig. 7.12 Stackelberg duopoly market

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

Fig. 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 will most likely leave the price unchanged. As a result of this, the company that raised the price will lose a large number of customers, since demand will be elastic, and, consequently, the company will reduce revenue and profit. If a firm reduces the price of its products, other firms will most likely reduce their prices as well. As a result of this, the expansion in sales volume will be insignificant (demand will be price inelastic) and will 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 one leads to a reduction in the company's revenue and profit.

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

In the 60s American economists Efroimson and P. Sweezy developed a model of a broken demand curve, which explains the tendency for the price level to increase during periods of economic growth (Figure 7.14).

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

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

In an 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 make it possible to describe the behavior of competitors in the market and choose the optimal course of action. In particular it is used game theory – a branch 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 conflict of interests of two or more parties pursuing different goals. Each of the parties to the conflict can have some influence on the course of events, but does not have the ability to completely control it.

The mathematical model should describe:

Multiple stakeholders;

Possible actions of each party;

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

Game theory assumes that the payoff functions and the set of strategies available to each player are publicly known.

Games are classified based on one principle or another.

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

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

Solving 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 character of the manager. There are solutions for:

The maximax (optimism) criterion, i.e. the manager focuses on maximum winnings;

The criterion of maximin (pessimism), i.e. the manager strives 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 sales volume in the market and two strategies for the company’s behavior are possible A: raise the price of products or leave the price unchanged (Table 7.1).

Since the competitor will take retaliatory actions, one of four situations may arise in the market:

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

2) company A IN increases the price;

3) company A raises price, company IN increases the price;

4) company A leaves the price unchanged, the company IN leaves the price unchanged.

Let us assume that the losses in the event of a price increase by the firm A will amount to 10,000 USD in our case, since some buyers will start buying goods from the company IN, which does not increase the price. If the company IN will also increase the price, then the losses of each company will amount to 5000 USD. The economic results of each situation for firms are presented in tabular form.

Table 7.1

Decision Matrix

				Minimum losses of firm B for each strategy
		The price is rising	The price does not change	Minimum losses of firm B for each strategy
		Firm A incurs losses in the amount of CU 5,000. Firm B incurs losses in the amount of CU 5,000.	A incurs losses in the amount of 10,000 USD. B receives a profit of $10,000.
	The price does not change	Firm A makes a profit of $10,000. Company B incurs losses in the amount of $10,000.	Firm A's income remains unchanged Firm B's income remains unchanged.
Minimum losses of firm A for each strategy

Company 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 company management A will increase the price, believing that the company IN will also increase the price.

If firms coordinated their actions (cooperative game), then prices in the market would remain unchanged. Research has shown that if players' payoffs are asymmetrical, 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 behavior patterns, which, ultimately, are focused on obtaining maximum profits. In modern economic literature, works appear that claim that large firms do not set the goal of their behavior to obtain maximum profit, but to achieve other results: increasing sales volume, maintaining a sales share in the market, 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 management decisions.

Main features of an oligopolistic market

Oligopoly is one of the most common market structures in

modern economy. In most countries, almost all heavy industries

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

1. Oligopoly is a market structure in which there are a small number of selling firms in the market for a product, each of which occupies a significant market share and has significant control over prices. However, one should not think that companies can literally be counted on one’s fingers. In an oligopolistic industry, as in monopolistic competition, there are often many small firms operating alongside 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 developments.

Formally, oligopolistic industries usually include those industries where there are several

largest firms (in different countries 3 to 8 companies are taken as the starting point)

produce more than half of all manufactured products

The main reason for the formation of an oligopoly is economies of scale in production.. 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, all 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 protecting the industry (the amount of initial capital, the control of existing firms over new technology And the latest products using patents and technical secrets, etc.).

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

5. Special economic policy of oligopolists. if several oligopolists begin to carry out general policy, then their joint market power will approach that of a monopoly.

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

reduce prices by less than 15%. In this case, this company 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 can declare a “price war”, i.e. reduce

prices still in to a greater extent. Then the question will arise whether to accept his challenge.

Usually in a “price war” among themselves large companies do not enter because it

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 company in an oligopolistic market.

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

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

That's why standard model There is no definition of the optimal production volume and product price for an oligopoly. We can say that determining the pricing policy of an oligopolist is not only a science, but also an art.

Types of Oligopoly

An oligopolistic structure can be very different, each of its

the variety leaves its mark on the development of the company's pricing policy.

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

Cartel (or conspiracy) of firms, which does not eliminate their production and

marketing independence, but providing for agreement between them on a number of issues. First of all, cartel agreements include uniform, monopoly high prices at which cartel participants are obliged to sell their goods on the market.

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

means that each cartel member undertakes to sell their goods,

for example, only in certain territories.

Moreover, to be able keep prices high, often

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

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

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

Let us assume that the firms participating in the cartel decide 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, allowing to maximize total profit. (MC = MR) But the most difficult problem is

distribution of sales volume between participants in a cartel agreement.

In an effort to maximize profits, the cartel must set quotas so that total costs are minimal. But in practice, it is quite difficult to establish such quotas. The problem is solved through complex negotiations, during which each company strives to

"bargain" for yourself best conditions, outwit your partners. In fact, markets are usually divided geographically or according to established sales volumes.

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

antimonopoly legislation. Agreement is often difficult to reach

due to the large number of companies, significant differences in nomenclature

products, cost level. Typically, a cartel member is tempted

break the agreement and make a big profit.

Due to legal prohibition, cartels are officially modern Russia does not exist. However, the practice of one-time price collusion is very widespread. Suffice it to remember how periodically there is a shortage of butter or sunflower oil or gasoline in the consumer market.

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

firms deliberately make their behavior understandable and predictable for

competitors, which makes it easier to achieve equilibrium or a state close to it in the industry.

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

certain unwritten rules. This policy, on the one hand, avoids legal liability arising from anti-cartel legislation. And on the other hand, to reduce the risk of unpredictable reactions from competitors, i.e. protect yourself from the main danger inherent in an uncoordinated oligopoly. “Playing by the rules” makes it easier to achieve oligopolistic equilibrium.

The most frequently used technique of “playing by the rules” is price leadership. It consists in the fact that all major price changes are first carried out by one company (usually the largest), and then they are repeated in similar sizes by other companies. The price leader essentially single-handedly determines prices (and therefore production volume) for the entire industry. But he does this in such a way that the new prices will suit others.