Oligopoly

As oligopoly ( from Greek oligos " little low" and pōleĩn " trade " ) - also oligopoly - is in the Microeconomics refers to a market structure in which many buyers face few suppliers. A Oligopson is exactly the reverse situation, in which a few buyers, many suppliers against it ( demand oligopoly ). An oligopoly with exactly two -party duopoly is, or duopoly, while a market where few providers also face few customers, as a bilateral oligopoly (also two-sided oligopoly ) is called.

Types of oligopolies

A special characteristic of an oligopoly is the reaction affinity between the price or quantity setting of the various providers. In an atomistic market structure ( Polypol ) this is not the case. Because there are only a few players, everyone has some degree of market power and can influence its price or quantity decision market activity. Consequently, the demand for the good of a provider depends on how its competitors behave, ie there is a strategic interdependence between providers. This interdependence is based on an oligopoly already exists when one of the competitor believes that the result of a decision taken by him is significantly dependent on the decisions of one or more other competitors. In oligopoly, the sellers are so aware that their decisions affect those of other sellers, buyers, however, take the market conditions as given. An oligopoly thus faces a complex decision problem, the quality of its decision but depends largely on how well it may assess the other 's influence on the decisions and anticipating this for themselves. Occasionally, oligopolies can just lead to a very intense competition. Lowers a provider the price, the competitors will adjust their prices too quickly on to lose customers.

Against the backdrop of this situation, various reactions of market participants are conceivable:

Representation in the theory

In theory, oligopolies are often analyzed with the tools of game theory. In such a game can anticipate the optimal reaction of competitors with complete information of each provider. A market equilibrium ( Nash equilibrium ) is deemed to exist if no supplier has an incentive to change its quantity or its price ( which would cause the corresponding reactions of competitors).

Oligopoly models

Cournot Oligopoly: market shall decide on which participants advance simultaneously on the levels of supply
Stackelberg competition: market shall decide on the participants in advance in a row using the quantities offered
Bertrand Competition: market shall decide on which participants advance simultaneously on the offer prices
Price leadership: market shall decide on the participants in advance in a row using the offer prices
Imitation: the market that does not have its own ( Cournot ) or common ( collusion ) oligopolists maximize profit, but the actions of competitors to imitate (if it has a higher profit )
Kreps - Scheinkman model: the participants decide the market, on the first simultaneously on capacity building and then simultaneously on the offer prices
Hotelling model: market where the participants decide in advance of their positioning (spatial or variants)
Sweezy model: market where the price is omitted as a competitive option of the participants, as this remains quasi rigid and therefore decide only variables such as advertising and services.
Three -D Model: Stringer and Rudnik describes the oligopoly of three dimensions.

Legal consequences

Direct price-fixing agreements are illegal under competition law because they can lead to an effect that influences overall economic prosperity negative. Social surplus ( welfare loss ) is reduced by the fact that the producers exploit consumers. However, mergers of companies may be banned from Cartel, if they lead to a harmful oligopoly. A harmful oligopoly exists when either a collusion of oligopolists threatening (so-called coordinated effects) or if the imitation of the oligopolists oligopoly leads to a peace. (see the recent study by Vorster (2013 ) ).

Due to the variety " independent brands " can be disguised an oligopoly. Among other things, the trade in CDs and other sources less an oligopoly suppliers who have a market share of almost 72% ( 2004). Due to the heterogeneity of the products and the low price elasticity of demand, the market was in the past in a very strong price and organizational structure.

Examples

On the German electricity market, there is an oligopoly. The current market is essentially divided among the four major companies E.ON, RWE, EnBW and Vattenfall, which together control 80 % of the generation market. The market leader E.ON alone controls 34%.

In the escalator there is an oligopoly. On the German escalator market today there are only four escalator Manufacturer: Otis Elevator Company, Schindler elevators, ThyssenKrupp Elevator and KONE. The elevators and escalators cartel was uncovered in 2004. At least in Germany and the Benelux countries worked the cartel. In sight of the investigators were there 17 subsidiaries of the world's leading quartet of elevator and escalator companies: ThyssenKrupp Elevator from Germany who for U.S. Group United Technologies owned Otis, Schindler from Switzerland, Kone of Finland and also the Mitsubishi Elevator Europe, the participated only in the Dutch cartel.

Another example is the mobile market: In Germany there are four public network operators, namely, T -Mobile, Vodafone, E-Plus and O ₂, faced by millions of mobile users.

The European oil industry is by the "Big Five " BP / Aral, Esso (Exxon ), Jet ( ConocoPhillips ), Shell and Total dominates in terms of both production and distribution of fuels. This oligopoly is accused in Germany for obstructing competition by the release of fuel at inflated prices to independent gas stations illegally.