Oligopoly

Name a product that you regularly purchase from a firm that operates in an oligopolistic industry. Explain why the product and firm fit the model of oligopoly. Think about the commercials and advertisements that you’ve seen from this industry: What interdependence have you noticed between the firm you selected and its rivals in terms of product differentiation, price leadership, or price competition? Explain your answer.

Submission Requirements:your post should be substantial,and answer the question in detail.

ANSWER

Oligopoly Market

            I often buy voice, data plans as well as Wi-Fi hotspot devices from Verizon company, an American telecommunications organization that provides communication services and wireless products in the United States. Verizon among the major companies that dominate the telecommunication industry in the United States. With its headquarters in Basking Ridge in New Jersey, the company is committed not only to provide services and products to customers but also to remain competitive in the industry. The variety of services, the products offered, and the industry within which Verizon operates can be described as an oligopolistic type of a market. This is because the telecommunication industry is characterized by a few large firms including T-Mobile (TMUS), Sprint (S), Verizon (VZ), and AT & T(T). Additionally, these firms represent an oligopoly market because they always provide the same services but have differentiated their product and services (data and voice bundles). Thus, although similar services are offered, there is a lack of uniformity.

These firms have made huge investments in the telecommunication market something that increases the barriers of entry such that a new firm trying to enter the industry finds it difficult due to the many requirements and the investment to be made.  Some of the factors that make it challenging for new firms to enter include economies of scale, high capital requirements, control of crucial inputs as well as exclusive patents (Gugler & Szücs, 2016). Also, a change in the advertising policy of one firm has a huge impact on the industry at large. When one firm makes a special advert or changes its advertising policy, the other firms are always alert and ready to take action following the steps taken by the rival (Feng et al., 2013). Each company often tries to remain independent and earn maximum profit by acting and reacting based on the price-output movements of rival firms when it comes to pricing.

Reference

Feng, Y., Li, B., & Li, B. (2013). Price competition in an oligopoly market with multiple iaas      cloud providers. IEEE Transactions on Computers, 63(1), 59-73.

Gugler, K., & Szücs, F. (2016). Merger externalities in oligopolistic markets. International          Journal of Industrial Organization, 47, 230-254.