So in order to stay relevant, they have to stay a step ahead and always be active. Therefore, the competitors in an Oligopoly Market are less but the competition itself is fierce. Comparing the case of India, almost 90% of this sector is captured by leaders such as, The Tribune, ABP news etc. the decision of one producer totally influences the decision of other firms.

It has an undisputed market share of 96.5% despite functioning in an open to all industry. When the firms produce differentiated products, then it is termed as a differentiated or imperfect oligopoly. When the product is homogeneous, a firm has no control over price, just a little bit increase in price will shift its buyers to other firms identical product. The number of buyers are so large that the demand of an individual buyer is only a small fraction of the market demand and the number of sellers are so large that supply of an individual seller is only a small fraction of the market supply.

An oligopolistic market is a highly interdependent market, meaning all players react based on their assumption of how their competitor might react. This reduces the competitive power, to some extent, of all the players. At the same time, it also leads to similar marketing strategies, pricing, differentiation, etc. from all the players in the market, thereby increasing competition. And such manipulation oligopoly market examples in india also ensures that other competition is kept out. The next important feature of an oligopolistic market is that there is very high product differentiation, with each product showcasing its distinctiveness over the other. Moreover, oligopoly is not only about price, it also depends on marketing strategies, product diversification, product quality, innovation, cost reduction, etc.

Infant Milk Substitutes Act, 1992 bans any kind of promotion of infant formula, feeding bottles and infant foods for 0-2 year-old children. Sectors, including cigarettes, non-banking finance companies , small cars, paints, adhesives, baby milk powder, hair oil, pharma APIs and health diagnostics, also throw up such examples. And, if we minutely observe, the sector shows group behavior as well. You can yourself check that the prime time for every channel is different. On an average, developed countries spend 8-9 percent of their GDP on healthcare and largely this is tax-funded or a form of social insurance. Government spending in healthcare in India is only 1 percent.

Mobile phone operators market in India is an example of nbsp nbsp …

“Over the last two years, we had many regulatory outcomes that were against everyone in the market except Jio,” Vodafone CEO Nick Read had said in February 2019. The CCI found merit in the complaint and launched an investigation into the charges. The Reliance-Future deal will put Reliance Retail beyond the reach of most players.

• The second casualty will be the basic telephony customers, who will be less preferable to those who consume both data and basic calls.
• This type of oligopoly occurs due to lack of understanding between the industries of the market.
• Price and output decision of one firm significantly impacts the price and output of decisions of the rival firms in the market.
• If it does, it automatically goes against the fundamentals of an oligopolistic market.
• In this strategy the industries are allowed to sell their product through a centralized syndicate.

Concentration is the capacity to influence economic decisions affecting the lives of large number of people, which is wielded by one or more persons, who has some obtained such capacity . Thus, we see concentration is an important dimension of market structure. Therefore, it is thought to play an important part in determining business behavior and performance. In between the multiple players and the single player, there exists a condition called ‘Oligopoly’; derived from the Greek words ‘Oligoi’ meaning few and ‘Pollien’ meaning to sell. Oligopoly, thus, is a market condition where there are very few players, typically, 3-5 large entities.

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Cooperation among the firm will motivate the monopoly behavior, while the strategic move of the firms makes it similar to the competitive market structure. For example, BSNL, Airtel and Vodafone are the major Indian service providers in the field of telecommunication. Light commercial vehicles are motor vehicles with at least four wheels, used for the carriage of goods.

Monopoly is a form of market in which there is only one seller of a product with no close substitutes and a large number of buyers. Needless to say, that with such severe competition, pricing is literally dominated by a few large firms. However, every price reduction is carefully planned as any reduction by one firm is followed by a similar price reduction by competitors, and overall, the price of the products in the market itself reduces.

Understanding Oligopoly

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Steel, cement or aluminium industries could be examples of it. Other examples of Oligopoly can be fixed broadband services or Fuel retailing. The steel, aluminium or cement market are the best examples of an Oligopoly market in India. Suppose you are entering in an industry as a Producer, Then you must know about the markets. Examples – Car Companies produces cars, all cars are different from each other in some way. Similarly Clothing Brands or Companies, Shoe Companies, Bike Companies and so much more which you can find around you with a brand name.

As explained above, Nike operates in multiple sub-segments, thus, the number of products offered is vast. The branding message of Nike has been on personal excellence, aimed at inspiring people into health and fitness. Moreover, Nike is very actively promoting its brands on social media platforms and has various celebrities like Michael Jordan, Tiger Woods, Serena Williams, Michelle Wie, Gretchen Bleiler, etc. endorsing their various brands.

Oligopolies can be followed in several industries such as steel, aluminum and automobile industries. Though, the British ruled period was a time of monopoly trade. But today, when globalization is at its peak, oligopoly is emerging as the leading market strategy. While the governments of a few countries are promoting it, others are banning it.

This enhances margins, lowers inventory costs, minimizes price fluctuations, and ensures on-time delivery. This was because Nike outsourced all their manufacturing to factories in Asia and other countries, where the cost of production and labour is low. Nike’s supply chain sources most of its raw materials locally, in the manufacturing country, which reduces the overall cost of production.

In other words, the large number of firms is quite small in an oligopolistic market. An oligopolistic market is a factor driven market and has interdependence on various factors. Thus, the selling price of the products in this market is quite unstable and varies at different instances. In this strategy there exists an industry as the price leader.

In other words, when firms in an industry agree to co-operate with one another, so as to behave as if they were a single seller, then they maximize joint profits. The cartel can restrict the total output produced and increase the prices in a similar way just as what a monopoly firm does with an intention to raise its profits. There are 12 major producers of news content in India; eight business houses have significant presence in multiple sectors, and dominate specific market segments. The emerging oligopolistic nature of the Indian media sector is examined. Using ownership patterns as a proxy for control over the media and the information it disseminates, the control that prominent media companies exercise across various markets in which they operate is mapped.

So it is not possible to draw a specific demand curve for an oligopoly firm. These barriers can be of different types such as patent rights, very high initial capital investment, full control over raw material resources of existing firms etc. In case of differentiated products, for example – automobile, the industry is known as differentiated or imperfect oligopoly.

Nature of the Market:

Theoretically one can consider perfect competitive market as the ideal market where two pivot assumptions i) large numbers of seller and ii) independently acting seller prevailed. With the help of these two assumptions there is no possibility of discrepancy among price and marginal receipts to attain profit maximization. But, the markets of the real world differ mostly in the number of firms and their relative size.

As a result, we found that only about 17 percent of the market is price controlled. It declined so much that in 2013 just before the new policy was announced, only 10 percent of the market was actually controlled. Generation and distribution of electricity is an expensive business to be in.

This is because it goes through several layers of intermediaries. Also, there is a huge promotional cost which pharmaceutical companies – medium and large scale – are happy to and https://1investing.in/ the promotional advertisement costs are on an average percent of the overall sales. In the other 25 percent of the market, moderate competition or monopolistic conditions exist.

But neither of these three companies leads in shareholder returns delivered by top cement manufacturers. That mantle goes to Shree Cement, the largest cement manufacturer in north India, whose stock price has grown at a CAGR of 38% during this period, though amid very thin trading volumes. On a standalone basis, Shree has the second-largest capacity, at 43 million tonnes.

In recent times, the tariffs of these firms have increased based on each other. As in an oligopoly market, the decision of one firm influences the process and working of another firm. A small change in a small firm has a direct impact on its rivals. Oligopoly is a type of market where there are a few sellers producing either a homogenous or differentiated product. In India, we have various examples of this type of competition.