In your responses, comment on at least two posts from your peers by providing examples from the news of oligopolistic markets. Compare and contrast with examples of monopolistic competitive markets.
student 1)
The features of oligopolies include, they are a market controlled by a small number of firms, there is no easy entry and exit into the market, and they are price setters, however they have to strategically plan what their pricing is going to be based off what they think their competition is going to do in the market.
Oligopolies set their price using game theory, or how other will behave in strategic situations. Oligopolies are faced with a dilemma when dealing with pricing strategy called the prison dilemma. The prison dilemma is a story about two prisoners who get caught for a crime. If both do not confess they will each get charged with a smaller crime. If one confesses and the other does not, the one who confessed will go free and the one who stayed silent gets the max penalty. If both confess, they both will receive a penalty, but it will be between the max penalty and the smaller charge. This how oligopolies think strategically on pricing. They can form a cartel and agree to produce at a level where they can split the profit. However, if one firm wants to produce at a level slightly higher than the agreed upon production level, then that firm can maximize profits over the other. In the firms decision they face two effects, “the output effect: Because price is above marginal cost, selling one more gallon of water at the going price will raise profit”, and “the price effect: Raising production will increase the total amount sold, which will lower the price of water and lower the profit from all the other gallons sold” (Mankiw, 2021 pg. 17-1d).
Oligopolistic markets only have a few firms working as the monopoly with a similar product. An example of this is Apple and Android, the only two main options for phones. Monopolistic competitive markets have many firms that our their own monopoly competing against others with slightly different versions of what they produce. An example of this would be fast food restaurants, they all are slightly different and have their own monopoly with their products, but there is a lot of different firms in this market.
Student 2)A market with an oligopolistic structure has few sellers, entry barriers, interdependence and widespread advertising. All or most of the market sales are controlled by a small number of sellers. As a new business, it is challenging to enter an oligopolistic, market and compete. An oligopolistic market is characterized by a well-established firm that enjoy economics of scale. All other competitors are impacted when a single company in the market modifies its pricing or marketing strategy. Finally, the companies use national exposure as part of their marketing strategy. Business operating in an oligopolistic market behave as though they were in a monopoly, their pricing and production levels should only permit the highest profit to be realized. This enables businesses to command a large portion of the produced goods market and generate substantial profit. profits are the primary metrics used to evaluate production and performance. The auto mobile industry is an example of oligopolistic market which has similar products in highly competitive industry. Microsoft is an example of a monopolistic market where the software products and services can be utilized at about 80% of personal computers at home.
