Name a product that you regularly purchase from a firm that operates in an oligopolistic industry. Explain why the product and firm fit the model of oligopoly. Think about the TV commercials and/or print advertisements that you’ve seen from this industry: What interdependence have you noticed between the firm you selected and its rivals in terms of product differentiation, price leadership, or price competition? Explain your answer.
Product: Cell phone network service provider like Verizon
Why is it like an oligopoly: Just like an oligopoly, the telecom market consists of a few large dominant firms controlling the market. The good provided is same by all the firms with minor differences. All the firms operate for the purpose of profit maximisation.
TV advertisements: The firms advertise heavily as they want to attract more customers. They advertise and show how their products or services are better than others.
Interdependence: Since the number of firms is less and large, they depend too much on each other in decissions of price and quantity. Any major changes by one in its pricing or selling strategy will affect the profits of other firms greatly.
This increases the tendency of these firms to collude. If the firms do not collude, they end up competing on the basis of price leading to price wars.
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