Monopoly and Oligopoly Essay

Monopoly and Oligopoly Essay The Main characteristics of an oligopoly ar that the supply of a withdraw or products is concentrated in the hands of a a few(prenominal) king-sized suppliers, there could be thousands of small suppliers but the market is mainly dominated by around 4 or 5 rotund firms. For practice session firms Tesco, Asda, Sainburys and Morrisons, these are the 4 main supermarkets in the UK but there are thousands of small corner shops who provide some of the same goods the supermarkets do. Another characteristics of an oligopoly is interdependence, this is when the actions of unrivaled large firm exit directly affect another large firm of the same market.For example during the Christmas period Tesco lowered the price on certain alcoholic drinks to pull customer in to the stores to buy their Christmas viands shopping, Asda then followed suit and did the exact same thing with the same products. On the other hand if firms raised their prices the other firm are genuinely unlikely to copy, the other firm are more likely to publish the fact they are now cheaper in the hope of puckering a large share of the market. However there is a tendency for firms to collude and rival to raise prices together, this maintains their abnormal profits and ensure no one loses.This doings is illegal in the UK and the EU and firms caught doing this will be heavily fined. drawframe Oligopolys are a few firm rule a market,a monopoly is a single firm dominating a market or being a sole supplier of a market, this is called a pure monopoly. An example of a pure monopoly would be Scottish water they are the sole provider to every theater in Scotland of running water. drawframe drawframe For some(prenominal) firm profit is a must for a business to survive, firms will look in to other parts of a market to gain potential profits.For a firm to move into a particular orbit of a market there would have to be good roles of profit. A firm would have to get a good return on their investment, the higher the risk and longer a firmhas to wait to earn a potential return on their capital, the greater the minimum required return on their investment they will demand. For a firm to move in to a particular sector,firms would also have to consider if this would attract raw investors. If the firm was going to make a quick return on its investment this would attract more investors as they would gain higher fare of dividends on their investment.