An Oligopoly Competitive Market Essay

716 WordsJun 26, 20123 Pages
An Oligopoly Competitive Market One example of a competitive market structure we encounter in business would be an oligopoly. An oligopoly, according to Case, Fair, and Oster, is “…an industry dominated by a few firms that, by virtue of their individual sizes, are large enough to influence the market price” (p. 283). One way to determine whether a market is oligopoly in nature would be to utilize the concentration ratio information provided within the United States Census Bureau’s “Economic Census.” Utilizing the Economic Census, a market can be said to be an oligopoly competitive market if the top four firms within an industry control at least 75 percent of the market share. To get a firm grasp on how this theory works I will study the concentration ratios of the four industries: fluid milk (311511), women's and girl’s cut & sew dresses (315233), envelopes (322232), and electronic computers (334111), to determine whether their competitive markets would be considered an oligopoly, and contemplate whether an oligopoly is always bad for society. Utilizing concentration ratios we find that the top four firms operating within the fluid milk industry (311511), control 42.2 percent, and envelopes (322232) with 51.1 percent of their respective market shares. Although market shares of 51 and 42 percent are large, they fall below 75 percent which is not enough to allow the top firms to influence pricing within the market, or to be considered as an oligopoly competitive market structure. Fluid milk and envelopes are such homogenous products that if the top 4 companies attempted to create a price increase they would see their customers choosing other sources for their product. The top 4 firms, with a fairly high share of the market would likely compete more on a strategic level then attempting to sell at a lower price. The top 4 firms within the women's and girl’s cut

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