This essay is dedicated to the market structure oligopoly, the different industries that are involved, and the main dynamics of how companies conduct business in this type of market place. An oligopoly is an occurrence in business where a few companies account for the majority of the sales in a particular industry. The presence of oligopoly can stifle competition which allows the few companies that are already established to have a stronghold on the industry. This allows those involved to have a great influence over government and policy which can be detrimental to society.
You may be asking “How do the firms gain power over an industry?” Many companies undergo mergers and acquisition to help grow their business and minimize their costs. Two types of mergers discussed in this chapter are vertical and horizontal. A vertical merger is when two specialized firms that produce different products combine. The book definition is “The joining of a firm with another to which it sells an output or from which it buys an input.” One example they give is, when a shoe manufacturer purchases a shoe outlet store (575). This type of merger doesn’t directly add to the issue of oligopoly, but it does give the merged company a bit more leverage in terms of cost. The other type, horizontal does directly add to this particular market structure. This merger occurs when two firms that produce a similar product join together. An example is two companies that both produce television’s merge.
One way economists measure or determine if an industry is comprised of an oligopoly is through the concentration ratio. This ratio highlights top companies in a given industry based upon output and sales. There is no set percentage that deems an industry an oligopoly because every market is different, but it does demonstrate who dominates among the selected group of companies. The example in the text breaks down the Cellphone Industry. They state that the total revenue of the cellphone service industry, of a recent year, was $117.1 billion. Of that total revenue AT&T received $30.8 bil, Verizon $29 bil, Sprint/Nextel $22.8 bil, and T-Mobile $13.3 bil. These four firms accounted for 82 percent of the cellphone service providing industry, 82 percent being the concentration ratio (576).
Another important aspect of understanding oligopoly is by analyzing how firms determine prices and how they react when other firms set their prices. One mechanism economists use to describe this behavior is through Game theory. Game theory describes possible outcomes when two firms set hypothetical prices, each price will have a corresponding benefit. More specifically there are different types of games, two examples are: a cooperative game and a non-cooperative game. A cooperative game is when the players or firms involved collude or agree on a situation that will give them the most beneficial outcome, or the most revenue. Non-cooperative games occur when the parties involved do not agree on setting a certain price, which happens most commonly, mainly because collusion is illegal.
One industry that is dominated by an oligopoly is the meat industry. Christopher Leonard wrote a book entitled “The Meat Racket”, and he discusses thoroughly how the meat industry is controlled by four firms: Tyson chicken, JBS, Cargill, and Smithfield food. He says as a result of the strong market power these companies can freely raise prices, making meat subsequently more expensive than it otherwise would be. Tyson accounts for 22 percent of the U.S. market for chicken; so the power that was once in the hands of the restaurants or supermarkets is now controlled by this mass producer. These companies have huge leverage in Washington due to the consolidation of the industry. Obama attempted to make anti-trust reforms on the industry and the meat companies dismantled the efforts completely. Not only do these companies have control over the prices, they also
Scott Locke The Evolution of Video Games Boxer, S. (2011, May 16). La noire – review. Retrieved from Guardian.co.uk. This video game review from the Guardian’s website exemplifies the thoughts many top video game reviewers have had on the recent release of Rockstar Games’ L.A. Noire. Believing that the game is more of an interactive drama than a traditional video game, Boxer asserts that the use of real expressions of the actors providing character voices creates a rich, deeply engaging experience…
new genre of sport. Most of the research and studies regarding the industry are currently taking place and most of the information is still being processed. This study examined the fantasy sports industry by dividing it into four major themes. The exciting development of fantasy sports over the years, the sociological and psychological motives behind participation in fantasy sports, the gambling and business sides of the industry and finally the future of fantasy sports. The findings of this study…
typed questions See the document, “Guidelines for Case Writing” 2 Mid Term Exam (20%) The mid-term exam is a closed-book exam that will be held in the first half of session 6. Company Report (20%) Your task is to analyze a firm (and the industries and markets in which the firm operates) of your choice. More specifically, your project should: Describe and critique the firm’s strategy Assess how the firm can develop and sustain a competitive advantage Evaluate the environment in…
8 Chapter 9 stewardship role game theory/economic theroy of games risk-sharing economic consequences-- conflict informaiton asymmetry positive accounting theory agency theory moving support employee stock options contrcting fixed support grant date employment contracts internalizing intrisic value cooperative game performance measure expiry date binding agreement internalizing vesting date constituencies performance measure nexus of contracts non-cooperative game informative contracting costs startegy…
Background Who is the king of the movie rental industry? Is it Blockbuster, Redbox or Netflix? Blockbuster was the king of VHS rental with their brick and mortar stores for more than 20 years. Netflix was the first to market with the idea of shipping DVDs directly to consumer’s homes but are now focusing their resources and attention to online streaming. Netflix is slowly getting out of the DVD and Blu-ray rental game by raising the prices of their DVDs and Blu-rays. Netflix is spending more…
Management Journal, Vol. 15, 167-178(1994) I THEORY, CHAOSTHEORY AND STRATEGY: APPLICATION. AND MANAGERIAL IMPLICATIONS DAVIDLEVY Department of Management, lJniversity of Massachusetfs- Boston Boston, Massachusetts, U.S.A. This paper argues that chaos theory provides a useful theorectical framework for understanding the dynamic evolution of industries and the complex interactions among industry actors. It is argued that industries can be conceptualized and modeled as complex, dynamic…
them becoming expensive and England would want more from the French because they were becoming cheaper. * The flaw of mercantilism was viewed as a zero sum game with no winner. Smith and Ricardo proved that it was a positive sum game where all countries can benefit. * Free trade * Adam smith’s theory of absolute advantage proposed that free trade is beneficial to a country. Situation where the government doesn’t attempt to influence through quotas or duties what its citizens…
renowned for the conducts of firms in the market. There are many behavioral tendencies in an oligopolistic industry including interdependence, uncertainty, rigid price, non-price competition, mergers and collusion. However, the most noted behavior are interdependent decision-making and their uncertainty. Each firm in oligopoly market keeps an eye on the activities taken by its rivals in the industry such as changes in prices, quantity and quality of output or changes in form of non-price competition…
the “Toy Industry”, and more sub level into “Electronic Gaming” Industry. Industry has shifted from traditional toys towards electronic entertainment to an complete entertainment solution provider. Customer preferences were changing. Gaming is not only for kid any more. Target audience for gaming became adults between 18-35. New customer audience needed more violence and better graphics in the games. Nintendo games were considered “dull”. Looking at industry using porter five force theory:…
Violence in Video Games Video games are popular amongst people of all ages, gender, and cultural upbringing. As time moves on, video games become more realistic. The realism in these games make it seem as though the player is actually in the game committing violent acts, such as, fighting and killing. There have been many arguments throughout the media and people on whether or not violent video games will increase violent behavior in the player. Even though the video game industry is booming in popularity…