Have you ever wondered if monopoly and oligopoly are any different? If so, you’re not alone
Oligopoly is defined as a market structure in which a few sellers dominate the market. In contrast, a monopoly is a situation where there is only one seller in the market.
In this blog post, we will explore some of the key differences between a monopoly and oligopoly, while discussing how they can impact consumers and businesses. Finally, we will offer our thoughts on which of these two market structures is better for the economy as a whole. Stay tuned!
What is a monopoly?
A monopoly is a market structure in which there is only one seller of a product or service. The seller may or may not have significant barriers to entry into the market. Barriers to entry can include things like high initial investment costs, exclusive access to raw materials, or government approval.
Monopolies can often arise naturally due to the high cost of starting a business in a particular industry. For example, it would be very expensive to start your own airline, so the market for air travel is likely to be a monopoly. The lack of competition in a monopoly can often lead to higher prices and inferior products for consumers.
Similarly, Google has a monopoly on internet search engines, as no other company can provide search results as good as theirs without purchasing their technology first.
Characteristics of a monopoly
A monopoly is a type of market structure in which a single firm produces and sells a unique product. Characteristics of monopolies include:
1. A single seller
- No competition or barriers to entry
- A lack of substitutes for the product or service being sold by the company
- The firm’s control over its product’s price and how it is distributed within the market
- A high degree of control over the industry
Examples of Monopoly in Pakistan
PTCL
PTCL is the only service provider in the country and it has been the monopoly for decades. There are no other competitors and hence, there is no choice for people to choose from. This has led to high prices and poor services.
WAPDA
The second example of a monopoly is WAPDA which runs power plants throughout the country and distributes power to consumers across Pakistan. This means that there is no competition between different power companies and as a result, they can charge whatever price they want without any fear of losing customers.
Pakistan Railways
The third example of a monopoly is Railways which transport goods from one place to another through trains. It does not have any competition in this sector as well and so can charge whatever prices it wants without any fear of losing customers or having competitors offering better services at lower prices.
PIA
The fourth example of a monopoly is PIA which provides air travel services across Pakistan and around the world too but does not have any competition in its sector either because there are no other airlines operating within Pakistan or around it so they can charge whatever prices they want without any fear of losing customers or having competitors offering better services at lower prices either since there are none available anyway!
What is an oligopoly?
An oligopoly is a market structure in which there are only a few firms producing a homogeneous or differentiated product. The main characteristics of an oligopoly are interdependence, non-price competition, and barriers to entry. Because there are few firms in an oligopoly, each firm is aware of the other firms’ prices and production levels.
This interdependence leads to strategic decision-making, as each firm tries to minimize the impact of the other firms’ decisions on its own profitability. For example, if one firm raises its prices, the other firms may respond by lowering their own prices or increasing their production levels.
Non-price competition is another key feature of an oligopoly. In order to differentiate their products and attract buyers, firms may engage in aggressive advertising and marketing campaigns.
Finally, oligopolies tend to have high barriers to entry, which protect existing firms from new competitors. These barriers can include government regulations, economies of scale, and brand loyalty.
Characteristics of Oligopoly in Economics
Oligopolies are a form of imperfect competition in which a small number of firms account for a large proportion of market share. In an oligopoly, a few firms may control the market by controlling prices or by producing differentiated products (or both).
The main characteristics of Oligopoly are:
- A few firms dominate the industry
- Barriers to entry exist
- There is some degree of collusion between firms
- They compete on price rather than quality of product or service
Examples of Oligopoly in Economics
Oil industry
In the oil industry, there are only four major players – ExxonMobil, Chevron, Shell and BP – controlling about 80 percent of global oil production. They have formed an informal alliance called OPEC (Organization of Petroleum Exporting Countries), which controls about 40 percent of world oil production.
Mobile phones
In mobile phones, there are four major firms controlling over 70 percent of the global market – Apple, Samsung Electronics, Huawei Technologies Co Ltd and LG Electronics Inc – which make up less than one-fifth of all smartphone users worldwide.
Automobiles industry
The car industry is highly concentrated and dominated by two companies — General Motors (GM) and Ford Motor Company — which manufacture most of the cars sold in North America, Europe and Japan (Toyota is also competitive). Other automakers such as Honda Motor Co., Nissan Motor Co., Hyundai Motor Co., Volkswagen AG (VW), Kia
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