The paper " Economics Questions & Answers" is a great example of a Macro & Microeconomics assignment. An oligopoly can be defined as an industry in which there are few firms that offer a homogenous product. In such a market, the number of firms in the market is sufficiently small and thus there is conscious dependence on each other when it comes to understanding competition in the market. . In this case, therefore, one firm understands that its future depends on both its policies and those of the rival in the market (Fischer, 2011).
The Australian soft drinks market is an example of an oligopoly because there are two firms namely Coca-cola and Pepsi that operate in the market. As a result, these firms can be able to adopt both high and low-level price strategies when it comes to maximizing profit in the market. Coca Cola and Pepsi have products that they sell to this market and thus can determine the price at any given time but several factors have to be considered including a kinked curve. Cut-throat competition is always adopted by these two companies when it comes to attracting potential customers.
There are a number of differences when it comes to looking at perfect competition and oligopoly competition in as far as market structures are concerned. In perfect competition, numerous firms sell identical products just like in an oligopoly (Pichurin, 2012). However, firms in perfect competition are price takers unlike in an oligopoly where they set the price of commodities. In an oligopoly, firms have a relatively large control in the market share unlike in a perfect competition where each of the firms controls a small section of the market due to the high level of competition involved.
Lastly, a perfect competition market is always characterized by freedom of entry and exit. On the other hand, an oligopoly market lacks freedom when it comes to exit and entry in the market. Tacit collusion oligopoly This happens when firms in a market have to accept the kind of prices that have been set by the dominant firm in the market. When this happens, firms that are involved are likely to engage in price-fixing cartels along the way. Non-collusive oligopoly This refers to a market in which firms compete with their sellers in the market.
This can be attributed to the rigidity in the price.
Fischer, S. (2011). Growth, Macroeconomics, and Development. NBER Macroeconomics Annual, 6, 329. http://dx.doi.org/10.2307/3585065
Freyssenet, M. (2008). 'Reflective Production': An Alternative to Mass Production and Lean Production?. Economic And Industrial Democracy, 19(1), 91-117. http://dx.doi.org/10.1177/0143831x98191005
Pichurin, I. (2012). Analysis of per capita income dynamics of the USA and Russia gross domestic product. Economy Of Region, 108-115. http://dx.doi.org/10.17059/2012-3-10
Remer, D., Lin, S., Yu, N., & Hsin, K. (2008). An update on cost and scale-up factors, international inflation indexes and location factors. International Journal Of Production Economics, 114(1), 333-346. http://dx.doi.org/10.1016/j.ijpe.2008.02.011