Identify and Explain the Key Features of an Oligopolistic Industry. Illustrate Your Answer with Reference to an Industry of Your Choice.

In: Business and Management

Submitted By rajeevramrekha
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Introduction The first section of this report outlines the key features and characteristics of an oligopolistic market structure. An oligopoly market structure can be differentiated from others because it has distinct features such as competition among a few firms, high concentration ratio and barriers to entry, non price competition, differentiated products and high level of interdependence between firms. The report also outlines and describes why the UK detergent industry which is dominated by a few firms reflects the model of an oligopoly. Several real life examples have been used to confirm the theory of oligopoly. Moreover, the price rigidity observed in an oligopolistic industry has been explained by the kind demand curve theory. The second section of the report examines the case of price fixing by Procter & Gamble, Unilever and Henkel, who are major players in the detergent industry in Europe. It relates the concept of collusion and how it has led the firms to price fixing arrangements in the detergent industry. Finally the economic rationale why Henkel was not fined by the European Competition Commission has been discussed.

Market structures may be generally categorised as the following: perfect competition, monopoly, oligopoly or monopolistic competition. These different types of market structures can be differentiated mainly by the number of competitors in a market and their market share.
An oligopoly is a form of market structure that has few sellers that dominate the industry and they tend to sell differentiated products. It is also one of the most predominant market structures in the business world.

One industry which is likely to be classified as an oligopolistic is the grocery industry in the UK. This industry is dominated by four main players, namely Tesco, Asda, Sainsbury’s and Morrisons. The 4-firm concentration ratio is around 76.4%…...

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