What are the main reason for the Emergence of Oligopoly?
Here we learn about the main reason for the Emergence of Oligopoly in detailed.
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What are the main Reason for the Emergence of Oligopoly?
Now we will discuss the Factors which are responsible for the emergence of oligopolistic market or industry are as follows:
- Economies of Large Scale ProductionEconomies of large scale production is one of the main factors responsible for the emergence of oligopolistic market or industry. When the market is small, only a few firms manage to achieve all the economies of scale and the output of each firm represents a substantial proportion of total industry output.
- Merger: Sometimes merger of firms in an industry is induced by the profit possibilities resulting from elimination of competition. Mergers lead to concentration of production and cost advantages.
- Product Differentiation: It is also one of the main factors which are responsible for the emergence of oligopolistic market or industry. Here In some cases product differentiation provides an important advantage to certain firms which manage to control a large proportion of total sales.
- Capital Requirements: It is also one of the reason responsible for the emergence of oligopolistic market or industry. Sometimes capital requirements are quite large to enter an industry successfully. Hence only a few firms dare to enter this industry.
- Absolute Cost Advantages: Absolute Cost Advantages is one the factors responsible for the emergence of oligopolistic market or industry. Here, sometimes a small number of firms enjoy absolute cost advantages over other firms. Consequently they can operate at a price that is too low from the point of view of other firms as this price does not allow them to recover their costs.
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What are the Reasons for the Emergence of Oligopoly?
Merger
Product Differentiation
Economies of Large Scale Production
Absolute Cost Advantages
Capital Requirements
Oligopoly - Reasons for the Emergence of Oligopoly.
Kinnari
Tech writer at NewsandStory