Oilgopoly

Question 1

What is an oilogopoly

Answer 1

An industry with high market concentration

Question 2

Example of oligopoly

Answer 2

Sports footwear

Nike and Adidas = 60%

Question 3

What is the concentration ratio of 5 companies for it to be an oligopoly

Answer 3

60% of total sales

Question 4

Usual features of an oligopoly

Answer 4

1. Product branding
2. Entry barriers
3. Decision making as a group/influence of others
4. Non-price competition

Question 5

What is non price competition

Answer 5

The use of advertising and market strategies to increase demand and develop brand loyalty among consumers .

Question 6

How else can businesses act to increase market share

Answer 6

• better quality services
• longer opening hours, online support
• discounts on product upgrades
• contractual relationships with suppliers (apple get 10% revenue from phone shops)

Question 7

What is strategic interdependence

Answer 7

One firms output and price decisions are influenced by the likely behaviour of competitors (few sellers = more knowledge)
@ high risk of tactic or explicit collusion which can lead to allegation of anti-competitive behaviour

Question 8

Certainty?

Answer 8

In an oligopoly there is a high level of uncertainty

Question 9

What is non collusive oligopoly

Answer 9

All behaviour by businesses in an oligopoly is strategic and much will depend on the key objectives of businesses

Question 10

Key objectives of businesses

Answer 10

1. Satisfactory profits
2. Protecting market share
3. Reacting to the decisions of rival firms
4. Growing their user base

Question 11

What are price wars

Answer 11

When companies continuously lower prices to undercut the competition. It can be used to increase revenue.

Question 12

Price wars in the SR and the LR

Answer 12

SR= increased sales and revenues
LR= commercial interests of a business

Question 13

What is collusion

Answer 13

A form of anti competitive behaviour. It can be horizontal or vertical

Question 14

Key aims of business collusion in an oligopoly

Answer 14

1. Maximise joint profits
2. Lowers the costs of competition (wasteful marketing wars)
3. Reduces uncertainty in a market (higher profits = higher producer surplus/shareholder value- leading to higher share prices)

Question 15

Iegal forms of business collusion

Answer 15

• improve production, distribution or technology
• standards and safety to benefit consumers
• better info for consumers
• research joint ventures and know how agreements which seek to improve innovative behaviour in a market e.g. EU R&D programme