Essays on The Australian Banks Competitive Market Assignment

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The paper "The Australian Banks Competitive Market" is an outstanding example of a micro and macroeconomic assignment. The Australian Banks operate in an oligopoly market. This is a market structure dominated by a few sellers. The entire output in an oligopolistic industry is produced by a few large firms and the contribution of each firm is sufficiently large to be significant in the market. Oligopoly is unique as a market structure in that the bank's pricing and output decisions will also incorporate the perceived or expected reaction of competitors.

This implies that the policies of firms in oligopolistic structures are interdependent (Mazzeo, 2002). The global financial crisis has really affected competition in the banking industry in Australia. It has led to the development of perfect competition in the banking sector where there are many banks and the customers have their right to join any. There has also been government intervention and the central bank coming up with different measures like sizeable fiscal stimulus, guarantees of bank deposits and bank debt issuance, a reduction in interest rates by commercial banks and in some cases, government intervention in troubled financial institutions. If the biggest four banks in Australia decide to collude and agree to charge a high price on banking products then there will be a collusive oligopoly.

The term ‘ collusion’ can be termed as to ‘ play together’ . When firms in the oligopolistic market came up with an agreement of not competing with each other about price or output, it is called a collusive oligopoly. The firms may agree on setting output quota, or fix prices or limit product promotion, or agree not to ‘ poach’ in each other’ s market: The firms that are in the competition thus form a ‘ cartel’ therefore behaving as if they are a single firm (Escrihuela‐Villar & Guillé n, 2014). For price-output determination in a collusive oligopoly, we assume that there are only three firms in the industry and they form ‘ a cartel’ , the products of all the three firms are homogenous and the cost curves of these firms are identical.

References

Davidson, C., & Matusz, S. J. (2014). Globalization and the market for high‐ability managers. International Journal of Economic Theory, 10(1), 107-124.

Dunker, F., Hoderlein, S., & Kaido, H. (2014). Nonparametric identification of endogenous and heterogeneous aggregate demand models: complements, bundles and the market level.

Escrihuela‐Villar, M., & Guillén, J. (2014). ON THE SUSTAINABILITY OF COLLUSION IN A DIFFERENTIATED OLIGOPOLY WITH A CARTEL AND A FRINGE. Bulletin of Economic Research.

Gohmann, S. F., & Fernandez, J. M. (2014). Proprietorship and unemployment in the United States. Journal of Business Venturing, 29(2), 289-309.

Hamilton, E., & Olson, E. (2014). Was the Euro good for Greece?. Applied Economics Letters, 21(4), 248-251.

Mazzeo, M. J. (2002). Product choice and oligopoly market structure. RAND Journal of Economics, 221-242.

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