The main features of the oligopoly. Characteristic signs of oligopoly oligopoly and its characteristic features

Forms of competition in the market

In most countries, the worlds there have been a transition to a market model of economic relations. Such a model allows the economy to respond quickly to the needs of society, through a flexible change in its structures and institutions. The main signs of the market economy are free entrepreneurship, where prices are formed by independent market participants, based on its conjuncture and their own purposes. Buyer independent in its consumer choice. The price is characterized by the utmost usefulness of a particular economic good for this individual. An important driving factor in market relations is competition.

Definition 1.

Competition is a special interaction of market entities, aimed at obtaining better conditions and maximizing its own income.

Currently, competing in the price policy has not been so effective, so entrepreneurs resort to various non-standard solutions for their business. In general, the influence of competition has a beneficial effect on the development of market relations, the introduction of new technologies and scientific and technical progress. Ultimately, competing for the consumer establishes a relatively balance of firms, creating favorable conditions for both manufacturers and buyers.

There is perfect and imperfect competition. The first is the perfect market model, where all participants act independently of each other and do not affect prices and sales volumes. The following types of imperfect competition operate in the real world:

monopolies or markets of one seller;
oligopolies where several manufacturers are operating;
monoppsies or markets of one buyer;
oligopsones or several buyers markets;
markets of monopolistic competition, where many manufacturers are fighting for market share, creating differentiated products or services.

Basic features of oligopoly

One of the types of imperfect competition is oligopoly. It is a market structure where two to twenty four large companies operates. A similar type of market is characteristic of industries producing high-tech and complex products or services. Oligopolies exist in the field of resource supply, in heavy industries, engineering, chemical industry, aircraft and shipbuilding, automotive industry and others.

The main features of this market structure include the following signs:

Products on the market may be homogeneous (for example, aluminum), and may be differentiated (automotive). Then distinguish clean and differentiated oligopoly.
Oligopoly accounts for a large market share. For example, in America there are only eight companies producing equipment for photography. They account for 85% of the market.
The offer on the market is concentrated in the hands of several large enterprises that determine sales and prices.
Very high barriers to market entry. This is due to the fact that the oligopolies are mainly in high-cost areas of activity, where participants rationally use resources. In addition, state permits, licenses, patents may be required to enter the market, which also requires a certain amount of time and cash.
The strong interrelation of oligopoly players leads to limited price control. Only the largest players can change prices under certain conditions.

Note 1.

Oligopoly is one of the most common forms of market structures. It is usually formed during the natural self-regulation of the market, when weak enterprises gradually lose their buyers and declare themselves by bankrupt. Sometimes, market participants can agree and ruin a competitor, and then buy it completely, or redeem a controlling stake. The gradual absorption of weaker enterprises leads to the formation of large corporations that divide the market.

In addition to competition, oligopolies are formed under the influence of business scaling. Since the above industries are highly cost, then only by increasing the scale of production, enterprises managed to recoup their expenses and make a profit. Large scale of enterprises allow them to maintain high market entry barriers for beginners, as there are practically no free market share for them.

Characteristic of oligopoly

The character of the oligopoly in a lot is determined by its distinctive features. Compared to the monopoly market or monopolistic competition market. Oligopoly is based on the principles of the most close to real processes in the economy. So for monopolistic competition of science, the production of homogeneous products is allowed, and for monopolies, the creation of differentiated products. In oligopoly, the products of both species are possible and really produced.

Note 2.

For the convenience of analyzing the differentiated oligopoly, the entire group of issued substitutes is taken for a homogeneous product. Usually, for such a market structure, the production of homogeneous goods and services is characteristic.

A special position in understanding the nature of the oligopoly is ranked. On the one hand, the "market of several" creates products for a variety of small buyers who do not affect the formation of the price. On the other hand, the oligopolists themselves affect each other. Any price changes lead to a general shift in the industry. A decrease in sales can play on the hand to competitors, so the company in oligopoly needs to find its balance sheet and demand for income.

Another feature of the oligopoly is the possibility of its participants to negotiate. They can discuss prices or their thresholds. The beginning of the price war considered in the Berran model can lead to the fact that all market participants will come to zero profit by covering only their expenses. When collusion also is the likelihood that someone from the players will change their mind and will act according to their own goals.

Oligopoly is distinguished by high thresholds of the entrance. However, here it also depends on the "friendship" of the participants of the oligopoly. When entering a new player, they can agree and establish prices for products that can only cover the cost of a new player. So, they will force him to open a small enterprise with high average costs, or a large enterprise that will not be able to pay off.

There are situations where the participants of the oligopoly begin to raise prices for the product. For example, one of the participants is a price leader. Then there is a general decrease in sales volumes, which frees the market share for beginners.

Oligopoly is such a market structure at which a small number of sellers dominates, and the entrance to the new producers is limited by high barriers.

The oligopolistic market is one of the most common market structures in the modern economy of various countries.

Almost all technically complex industries such as metallurgy, automotive, electronics, ship and aircraft construction, function in the oligopolistic market.

The first characteristic feature of the oligopoly lies in the neglence of firms in the industry. This indicates the etymology of the very concept of "oligopoly" (Greek. "Oligos" - several, "Polio" - sell, trade).

Usually their number does not exceed ten. Such a situation has developed, for example, in the American steel industry, in the production of primary lead, copper, glass, fur products, etc.

The most high concentration in the US Automotive Industry: for three companies ("General Motors", "Ford" and "Chrysler") accounted for over 95% of the national production of cars in the 80s. Examples and other industries of the US manufacturing industry can be given (production of home refrigerators, vacuum cleaners, washing machines, light bulbs, postcards, telephone sets), for which the high concentration of production is characterized by only several firms.

It should only be noted that these data, as well as all statistical indicators, have obvious disadvantages. They either exaggerate or the degree of concentration. Exaggerate, since they do not take into account foreign and intersectoral competition (in the American market, for example, every fourth car - foreign production), as well as competition from suppliers. It is understood because the degree of concentration at the national level is estimated, and not at the level of regions or individual cities, where two or three local companies are often dominated in the markets of some goods and services (production of bricks, concrete, perishable foods etc.). In addition, along with the classic (tough) oligopoly, in which 3-4 firms play a major role, there is also a soft (amorphous) oligopoly when the main share of products is produced by 6-8 firms.

Oligopolistic situations may occur in sectors producing both standardized goods (aluminum, copper) and differentiated (cars, washing powders, cigarettes, electrical appliances).

The oligopolistic market structure as noted above is the predominant for modern industrialized countries. In Russia, the largest part of industrial products and certain types of services are made in oligopolistic industries. In most cases, the composition of the participants of the Russian oligopolistic market of the market is still formed, competition in some industries is not yet developed, in others - it becomes hard, sometimes merciless character, rapid changes occur in the market structure.

The most characteristic oligopolistic sectors of the Russian Federation includes the oil production and oil refining industry (including the regional structure and localization of the markets); ferrous metallurgy (according to the main types of products and taking into account the specialization of production); non-ferrous metallurgy (production of aluminum, tin, lead, zinc, etc.); production of electromasic and electric motors; machine tool; Motor building; Manufacture of cars, buses and tractors; production of combines, excavator construction; production of television and radio equipment; production of electronic computers; Production of refrigerators, freezers, washing machines; chemical industry (most types of products); aviation transport; shipping.

Oligopoly is characteristic of Russian conditions during the sale of grain, sugar, flax, large battalities.

The second characteristic feature of the oligopoly is high barriers to entry into the industry. They are associated primarily with savings on the scale of production (scale effect), which acts as the most important cause of widespread and long-term preservation of oligopolistic structures. The industry acquires an oligopolistic structure if the large size of the enterprise provides substantial cost savings and, therefore, if large enterprises have significant advantages compared to small.

The fact is that large enterprises in the industry can never be a lot. Already a multi-billion dollar value of them serves as a reliable barrier on the path of penetration into the industry. But even if there were funds to build a large number of giants, they would not be able to work profitably. After all, the market capacity is limited.

In the automotive industry in the USA in the 80s., For example, the minimum effective volume of production was 300 thousand cars per year. Since many enterprises produced at least two models at the same time, the cost of such a plant usually exceeded $ 3 billion. Such large investments are not available for all firms, therefore, objective prerequisites are created to maintain the leading position of car giants. It should be noted that if at the beginning of the 20th century the number of American automotive firms approached 200, then at the end of the 20s. Their number did not exceed 50, and now they can be counted on their fingers.

The effect of scale is an important, but not the only reason, since the level of concentration in many industries exceeds the optimal effective level. The oligopolistic concentration is generated by some other barriers to entering the industry. This may be associated with a patent monopoly, as it occurs in high-tech industries controlled by "Xerox", "Kodak", "IBM", etc. Throughout the term of the patent (in the US - 17 years old), the firm is reliably protected from internal Competition.

Among other reasons - a monopoly of control over rare sources of raw materials (for example, in the 60-70s business).

There are other barters, naturally established or artificially created. Barters are different in strength. Although there are no insurmountable barriers, they arise again and again.

The third characteristic feature of the oligopoly is universal interdependence. Oligopoly arises in the event that the number of firms in the industry for so much not enough that each of them is forced to take into account the reaction from competitors into account. Just like the chess player should take into account the possible moves of the enemy, the oligopolyster should be ready for various (often alternative) options for the development of the market situation as a result of various behavior of competitors. With the monopolistic structure of such a provision, there are no competitors (there are no competitors), with perfect and monopolistic competition - also (competitors, on the contrary, too much, and take into account their actions are not possible).

Meanwhile, the reaction of competitors can be different, and it is difficult to predict it. Oligopolistic interdependence is the need to take into account the reaction of competitors to the actions of a large firm in the oligopolistic market.

Any model of oligopoly must proceed from accounting for competitors. This is an additional substantial limitation that must be taken into account when choosing a scheme of the behavior of an oligopolistic firm. Therefore, a standard model for determining the optimal volume of production and product prices for oligopoly does not exist.

It can be said that the definition of the price policy of the oligopolist is not only science, but also art. Here, the subjective qualities of the manager are played here, such as intuition, the ability to take non-standard solutions, to risk, courage, determination, etc.

There are reasons that explain the difficulties of using formal economic analysis when explaining the price behavior of the oligopoly:

1) Oligopoly includes a variety of special market structures. There is a "tough" and "blurry" oligopoly. The "tough" oligopoly arises under domination of 3 - 4 enterprises throughout the market. "Blurry" is possible when 8 - 10 firms control 70 - 80% of the market. Many species and types of oligopoly makes it difficult to develop any simple market model, which will give a general explanation of the oligopolistic behavior in the field of pricing;

2) Universal interdependence and the inability to predict with confidence. The behavior of competitors complicates the situation in determining demand and utmost income, and this affects the establishment of price and production volume.

Despite these difficulties, two interrelated features of oligopolistic pricing appear. On the one hand, oligopolistic prices tend to be inflexible, i.e. "tough". On the other hand, when oligopolistic prices change, it is likely that enterprises change their prices together. Oligopolistic price behavior involves the presence of incentives and agreed actions, or a secret conspiracy when setting prices.

In terms of a high degree of uncertainty, oligopolists behave differently. Some are trying to ignore, compete and act, as if perfect competition is dominated in the industry. Others, on the contrary, try to foresee the behavior of rivals and carefully follow each step. Finally, some of them consider the most advantageous secret conspiracy with opponents.

In real reality, all these three options for market behavior can be at the same time. Since the management of the company must constantly take many decisions, it is practically unable to predict the reaction of competitors to every effect. Therefore, in many tactical issues relating to secondary aspects, decisions are made quite independently. On the other hand, when developing strategic decisions, the firm is working to optimize relationships with rivals. The task of economic theory is to explore the rules of rational choice, attracting the apparatus of the theory of games. Each "player" is looking for such a move in order to maximize its benefit and at the same time limit the freedom of choice from a competitor. In search of the most "simple" way, the rivals can enter into a direct conspiracy, negotiating a single price policy, about the sale of sales markets, etc. The last case is most dangerous for society and, as a rule, is prohibited by the norms of antitrust laws.

Consider four different pricing models to reveal the essence of oligopoly:

1) pricing not based on a secret collusion: one of the enterprises changes the price, the investigation is a change in the demand for industry products (a broken demand curve);

2) pricing due to secret collusion - the trend towards maximizing the total profit of enterprises;

3) adaptation of prices to the prices of the dominant enterprise (silent secret agreement);

4) pricing on the principle of "costs plus".

Similar information.

Oligopoly- This is the market on which a relatively small number of sellers serves a lot of buyers. Oligopoly refers to the type of market structure of imperfect competition, in which the extremely small number of firms prevails.

Examples of oligopoly can be called passenger aircraft manufacturers, such as Boeing or Airbus, car manufacturers, such as Mercedes, BMW.

The conditions for the occurrence of oligopoly

Oligopolies often arise naturally, as companies grow and begin to capture an increasing market share, gradually ousting or absorbing competitors. Over time, the number of companies offering certain products and services begins to decline to several large corporations. Customers in turn when choosing products tend to trust more eminent and solid brands.

In the formed oligopoly, dominant companies feel pretty freely and can afford to fully control the pricing. So, for example, many mobile phones manufacturing companies will significantly overestimate the price of their products just because they are popular and can afford it.

Basic features of oligopoly

When a small number of firms are present on the market, they are called oligopolies. In some cases, oligopolys may be called the largest firms in the industry. The products that the oligopoly supplies is identical to the competitors' products (for example, mobile communication), or has differentiation (for example, washing powders).

At the same time, price competition is very rarely manifested at the oligopol markets. As a rule, the entrance to the oligopol market of new firms is very difficult. The barriers are either legislative restrictions, or the need for the initial capital of large size. Therefore, a large business acts as an example of oligopoly.

Thus, oligopolistic markets have the following signs:

small number of firms and a large number of buyers. This means that the volume of the market offer is in the hands of several large firms that implement the product to many small buyers;

differentiated or standardized products;

solutions of oligopolists regarding production and price volumes - interdependent, i.e. Oligopolies in all over each other. So if one oligopolist will reduce prices, then others will definitely follow its example. But if one oligopolist increases prices, others may not follow its example, as they risk losing their market share;

the presence of significant obstacles to the entry into the market, i.e. high market entry barriers;

the firms in the industry are aware of their interdependence, so price control is limited.

Price policy

One of the main factors of the influence of dominant companies to the market as a whole are relationships with competitors in terms of pricing policy. The price policy of the company - the oligopolist plays a huge role in her life.

As a rule, the company does not benefit the prices of their goods and services, since the likelihood that other firms will not follow first, and consumers will "go" to the rival company.

If the company lowers prices for its products, so as not to lose customers, competitors usually follow the dropping price by the company, also reducing the prices of the goods offered by them: the "Race of the leader" occurs. That is, when the company reduces prices or offers new services or products, competitors must follow its example. Otherwise, if they do not provide customers with an alternative, they can even lose those businesses.

Thus, the so-called price wars often happen between oligopolists, in which companies establish the price for their products, not greater than that of the leader's competitor.

Types and structure of oligopoly

Oligopolies can be classified as follows:

net oligopoly is a situation in which companies produce homogeneous products (cement, steel, oil, gas.);

differentiated oligopoly is a situation where companies produce similar products (cars, airplanes, telephones, computers, cigarettes, drinks, and so on);

collective oligopoly is when firms cooperate with each other in determining the price or volume of product release. Such a structure bears signs of collusion and monopolization of the market.

Strategies of the behavior of oligopoly

The strategies of the behavior of oligopoly are divided into two groups. The first group provides for the coordination of actions by firms with competitors (cooperative strategy), the second is the lack of consistency (non-opoperative strategy).

Models of oligopoly

In practice, the following models of oligopoly distinguish:

model of leadership at prices (volume);

cartel model;

berran model (price war model);

model Koro.

Pricing Leadership Model (Volume)

As a rule, among the totality of firms, one, which becomes the leader in the market is allocated. This is due, for example, with a duration of existence (authority), the availability of more professional personnel, the availability of scientific units and the latest technologies, a higher share of them in the market. The leader is the first to make changes regarding the price or volume of production. At the same time, the remaining firms repeat the actions of the leader. As a result, there is consistency in general actions. The leader must be most informed about the dynamics of demand for products in the industry, as well as on the possibilities of competitors.

Model of cartel

The best strategy for oligopoly is a conspirass with competitors about the production prices, product volumes. Credit makes it possible to strengthen the power of each of the firms and use the possibility of obtaining economic profits in such a size in which it would receive if the market was monopoly. Such a collusion in the economy is called the cartel.

Berran model (price war model)

It is assumed that each company wants to become even larger and ideally capture the entire market. To force their competitors, one of the firms begins to reduce the price. The rest of the firms not to lose their share are forced to do the same. The price war continues until one firm remains on the market. The rest are closed.

Model KURNY

The behavior of firms is based on a comparison of an independent forecast of market changes. Each company calculates the actions of competitors and chooses such a production and price that stabilizes its position in the market. If the initial calculations are erroneous, the firm corrected the selected parameters. After a certain period of time, the share of each company in the market is stabilized and in the future do not change.

Pros and Cons Oligopoly

If we talk about the positive and negative points of oligopoly as structures, it should be noted that there are both significant advantages and cons.

The advantages can be attributed to the fact that large companies compete quite strongly with each other than stimulate the growth of the quality of products and scientific and technological progress in general.

Nevertheless, such competition combined with the enormous opportunities of large firms can significantly limit the emergence of new players on a specific market of goods or services.

Antimonopoly legislation

Antimonopoly legislation - legislation aimed against the accumulation by firms dangerous to society of monopoly power. The goal of antitrust regulation is to force monopolists to appoint such a price for the goods that provided them with only normal profits, and not.

Measures of antitrust regulation are: regulation of prices of monopolist firms, reducing the terms of the licenses of monopolist firms, fragmentation of monopolist firms, the nationalization of monopolists.

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Oligopoly: Characteristics and pricing policy

Oligopoly - this is the type of market structure in which market Merrates several firms, each of which is capable of influencing their actions on market price . The oligopolistic market includes many really existing markets.

Let's call the characteristic features of the oligopolistic market :

Small number of firms in the industry . Oligopoly may occur in branches producing both standardized goods (aluminum, copper, steel) and differentiated (aircraft, cars, washing powders, electrical appliances, computers, telephone sets, etc.).
High barriers to the industry . High barriers are primarily related to production savings ( scope effect ) - the most important cause of widespread and long-term preservation of oligopolistic structures.
The oligopolistic concentration is generated by some other barriers to entering the industry. It may be due to patent monopoly (in high-tech industries), monopolies of control over rare sources of raw materials (oil carriage of OPEC), extended high costs for advertising.
Interdependence of all firms in the market when setting prices . Oligopoly arises in the event that the number of companies in the industry is so small that each of them in the formation of its economic policy is forced to take into account the reaction from competitors. This is also manifested in the conditions of exacerbation of a competitive struggle, and in conditions when an agreement with other oligopolists is achieved and the tendency of the industry in purely monopoly is achieved.
Prices in the oligopol market for a certain period of time are insensitive to changes in market conditions . Firms are trying to keep the price in the "hard" framework, preferring to manipulate production volumes.

The price policy of the oligopolist plays a huge role . As a rule, the company does not benefit the prices of their goods and services, since the likelihood that other firms will not follow first, and consumers will "go" to the rival company. If the leader's firm lowers prices for its products, so as not to lose customers, competitors are usually followed by the company's dropping price by the company, also reducing the prices of the goods offered by them: "Race behind the leader" occurs.

Thus, the so-called price wars often happen between oligopolists, in which companies establish the price for their products, not greater than that of the leader's competitor.

Price war - This is a cycle of a gradual decline in the existing price level in order to displacing competitors from the oligopolistic market. From the price war, consumers will benefit and lose manufacturers. Price Wars are destructive for those companies that compete with more influential and large firms.

Price Wars are measurable and are currently quite rare. Competitive struggle with each other more often leads to agreements that take into account the possible actions of other manufacturers.

When several companies dominate in the industries, such industries are called oligopolyor

Oligopolythey call the type of market, in which several firms control its bulk part. In this case, the differentiation of products can be both small (oil) and quite extensive (cars). The oligopoly is characterized by restrictions on the entry of new firms in the industry, which are associated with the effect of the scale, large costs for advertising, existing patents and licenses, the actions taken by competitors.

Characteristic signs of oligopoly:

1. A small number of major firms in the industry (Oligopolies may be homogeneous (oil, gas) and differentiated (cars)). With the characteristic domination of oligopolys, the rule apply for 4 leading firms in total manufacturing in the industry (if more than 60%, the industry is oligopolistic. Oligopolies usually exist in sectors producing technically complex products or goods produced in small quantities.

2. A characteristic feature of the oligopoly is the merger and conspiracy of firms. The motives of the association may be different: voluntary (monopolists), forced (a large firm forces small firm to merge to the merger of small), generally absorption (buying small firms that endure bankruptcy, etc.).

3. Unlike a pure monopoly in the condition of monopolistic competition (industry),each firm is forced to calculate response actions on their changes (the general interdependence of firms from few firms).

Specific traits:

1. several very large firms;

2. the product is standardized or differentiated;

3. the cost control limits interdependence;

4. the possibility of conspiracy about the price, market section, etc.;

5. there are obstacles to the branch of new firms;

6. independent competition;

7. demand and suggestions are slightly elastic.

Oligopoly exists when the number of firms in the industry is so small that each company in the formation of its pricing policy should take into account the reaction of competitors. Another feature of the oligopoly is the interdependence of solutions to firms at prices and the volume of production.

Types of oligopoly:

1. homogeneous (dense) -when firms produce identical products;

2. differentiated - When produce similar, but not the same products;

3. hard - when in the industry 3-4 firms;

4. blurry - when in the industry 6-7 firms;

5. based on a secret collusion;

6. not based on collusion -firms are not dependent, but the leader sets the parameters of the market;

7. based on merger association;

8. based on the production of technically complex goods, When there are few major firms in the industry, where the positive effect of the scale of production is valid.

Types of relationships

At the concentration of sellers on the same market, the oligopoly is divided into dense and rare.

To dense oligopolybelieve such industry structures that are represented by 2-8 sellers on the market.

To discharged oligopoliespresent market structures that include more than 8 business entities.

Based on the nature of the products offered, the oligopoly can be divided into ordinary and differentiated.

Ordinary oligopolyrelated to the production and suggestion of standard products.

Differentiated oligopolyform based on the release of the products of a diverse assortment.

Total estimate of oligopolistic structures

Positive assessmentoligopolistic structures are associated primarily by the achievements of scientific and technological progress. Oligopolies have enormous financial resources, as well as noticeable influence of political and economic circles of society, allowing them to participate in the implementation of beneficial projects and programs funded from public funds with one degree or another.

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