Question

Which model of oligopoly best fits the airline industry? Justify your answer.

Answer 1

Oligopoly refers to a market situation in which there are a few firms selling homogeneous or differentiated products . Oligopoly is sometimes also known as 'competition among the few' as there are few sellers in the market and every seller influences and is influenced by the behaviour of other firms.

DUOPOLY best fits the airline industry because duopoly is a special case of oligopoly, in which there are exactly two sellers. Under duopoly it is assumed that the product sold by the two firms is homogegneous and there is no substitute for it. Examples where two companies control a large proportion of a market are : (i) Pepsi and Coca-cola in the soft drink market . (ii) Airbus and Boeing in thecommercial large jet aircraft market . (iii) Intel and AMD in the consumer desktop computer microprocessor market.