1.1 Fill in the missing words
Assumptions/Features Explanation
_____________ number of large firms
They sell ________________ goods, often only slightly differentiated.
In an oligopoly there are a __________ number of large firms which co-exist with a ___________ number of small firms.
Oligopolies will tend to sell ______________ goods which are differentiated through branding, advertising and packaging. This will allow them to establish some brand loyalty
They possess some ____________ setting powers
__________ barrier to entry
Oligopolies will use their _______ loyalty to set ________ but they are also aware that they cannot set prices too high because rival firms will be able to compete and capture market share.
Oligopolies can use barriers to entry to protect their __________ normal _________ in the _______ run, by preventing other firms from entering the market and competing away these ___________.
Imperfect Knowledge Firms will not have access to other firms’ ________ and
___________. Whilst consumers will not be able to access the firms’
___________ and ______________ data.
All the above features result in firms within an oligopoly being said to be ____________________________ .
This means that the actions of one firm in an oligopoly will have a direct impact on the other firms in the industry.
For example if one firm __________ price then others will do likewise to not lose market share and a price _____ will start. If a firm _____________ their prices then the other firms will not react in the same way and sell their similar goods and hope to _________ market share.
1.2 Identify the following examples of oligopoly industries from the descriptions.
______________
This industry has a small number of major manufacturers. There has been some recent consolidation. One of the reasons for these large firms operating is the extremely high costs for research and development to achieve patented new products and the necessary compliance with government regulations.
______________
______________
This industry has a small number of major operators. They have a tendency to run regional monopolies and often are the only company operating out of a country. One of the reasons for the development of such large firms is the very high costs of the equipment needed to operate the routes.
This industry is dominated by a small number of multinational firms that sell relatively cheap items, which they brand for an international market. They have developed significant brand loyalty and have used this to expand into related markets. There are extremely high start-up costs in establishing the brand image; the barrier to entry is largely that generations are brought up to see established brands as providers of the authentic taste..
______________
These firms retail very similar products, which are used by a variety of consumers and industries in their everyday operations. They operate in a wide variety of locations, and benefit from significant economies of scale. In recent years firms with significant land available, such as supermarkets, have entered this industry and are now playing a major role in the market.
2.1 Concentration ratios
Complete the following statements
Definition: A four firm concentration ratio can be defined as the _____________ share controlled by the four ____________ firms in the market.
Calculate the four firm concentration ratio in the US airline market. __________________ www.a-zbusinesstraining.com