Oligopoly theory.

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Presentation transcript:

Oligopoly theory

Recap What is an oligopoly What is a concentration ratio? What is the concentration ratio for an oligopoly?

Market structure - oligopoly Market is concentrated in a few firms. Concentration ratio of top 3 or top 5 firms with 60%. Firms must be interdependent – behaviour of one will affect the others! Barriers to entry exist.

Supermarkets 'hurting suppliers' Aggressive price-cutting tactics by supermarkets could result in the loss of tens of thousands of jobs in the food industry, a union has warned. Unite has accused retail giants of driving down suppliers' profits.

Background info…..! Female hygiene http://www.bized.co.uk/current/mind/2005_6/120905.htm

Research Project http://www.bized.co.uk/educators/16-19/economics/firms/activity/structure.htm Your research project. Look up the latest ‘oligopoly watch’ news…

Tasks to do… What is the concentration ratio of the industry? Consider the nature of the competition in the industry - is there evidence of kinked demand curves, non-price competition, branding and so on? Is there any evidence of collusion in the industry? Is there a price leader in the market? Is there evidence that abnormal profits exist in the industry? What barriers to entry can you identify in the industry? What evidence of interdependence exists in the industry?