How could be an Oligopolistic market become Efficient

1. Oligopoly and Efficiency
Presentation by
SaifUllah Group

2. Oligopoly
Definition:
A situation in which a
particular market is controlled
by a small group of firms.
An oligopoly is much like a
monopoly, in which only one
company exerts control over
most of a market. In an
oligopoly, there are at least
two firms controlling the
market.

3. Characteristics of Oligopoly
1. Industry dominance by few large firms
o Few large firms
o Market control
2. Entry Barriers
o Market control
o If new firm enters it compete
o Manufacturing without sale

4. Characteristics of Oligopoly
3. Homogeneous or differentiate
product:
o Homogeneous products
e.g. steel, petroleum and aluminum
o Differentiate product
e.g. computers, household and
automobiles

5. Characteristics of Oligopoly
4. Rigidity in Price
o Change in price hardly taken place
o Price war
o Consultation with other firms
5. Strategy
o Interdependence
o Decision based on rival’s reaction

6. Characteristics of Oligopoly
6. Interdependence
o Effect of change in price
o Reaction of Rival
o Uncertainty
7. Advertising and Marketing cost
o Aggressive Marketing to gain market share
o Advertising in other marketing structures

7. Efficiency
Efficiency
Economics efficiency is the used of resources so as to
maximize the production of goods and services.
Two types of Efficiency,
Productive Efficiency:
When the firm produce their output in the least cost manner.
when (P = Minimum ATC)
Allocative efficiency:
When the quantity of output produced achieves greatest level
of total welfare possible (P = MC).

8. Oligopoly and Efficiency
Oligopoly and Efficiency
• Not productively
efficient
• Not allocatively efficient
• Tendency to share the
monopoly profit

9. Oligopoly and Efficiency
Qualifications
• Increased foreign competition
• Limit pricing
• Technological advance