Question

Why is airline industry a oligopoly and how does it behave as an oligopoly market . Please give many points as I have to use it for a paper

Answer 1

Answer : An Oligopoly exist only when there are few firms in the market.The most important point which shows that airlines industry is an Oligopoly is barriers to entry in the market place. There are following characteristics which shows that airlines is an Oligopoly in the market as follows:

• Small number of carriers and Market share.
• High barriers to entry.
• Economics of scale
• Growth occurs through merger.
• Mutual dependent on each other.

It behaves like an Oligopoly Market such as :

• As airlines industry is composed of few firms.
• It producing either similar or slightly differentiated product.
• Few sellers in the market
• Barriers to entry
• Huge capital investment
• Industry has been acquired by few firms in an airline industry.