Oligopoly theory

1
Oligopoly theory
2
Recap

• What is an oligopoly
• What is a concentration ratio?
• What is the concentration ratio for an oligopoly?

3
Market structure - oligopoly

• Market is concentrated in a few firms.
• Concentration ratio of top 3 or top 5 firms with
  60.
• Firms must be interdependent behaviour of one
  will affect the others!
• Barriers to entry exist.

4
Supermarkets 'hurting suppliers'

• Aggressive price-cutting tactics by supermarkets
  could result in the loss of tens of thousands of
  jobs in the food industry, a union has warned.
• Unite has accused retail giants of driving down
  suppliers' profits.

5
Background info..!

• Female hygiene http//www.bized.co.uk/current/mind
  /2005_6/120905.htm

6
Research Project

• http//www.bized.co.uk/educators/16-19/economics/f
  irms/activity/structure.htm
• Your research project.
• Look up the latest oligopoly watch news

7
Tasks to do

• What is the concentration ratio of the industry?
• Consider the nature of the competition in the
  industry - is there evidence of kinked demand
  curves, non-price competition, branding and so
  on?
• Is there any evidence of collusion in the
  industry?
• Is there a price leader in the market?
• Is there evidence that abnormal profits exist in
  the industry?
• What barriers to entry can you identify in the
  industry?
• What evidence of interdependence exists in the
  industry?