1. OLIGOLPOLYOligopoly is a market situation where there are more than 2 producers of a product. Whenthere are two producers, it is called duopoly, which is also an imperfect market situation andso a special case of oligopoly. The number of producers in oligopoly are lesser than that ofperfect competition and monopolistic competition. We will be presenting the nature of thismarket and examining the features with case studies in brief.Oligopoly is an actual market situation. In the report we have presented a few of the real lifemarket structures. It is an imperfect market with few sellers of similar or differentiatedproducts. The few firms in oligopoly enjoy a high degree of market power. The market powerdepends on the number of sellers, barriers to entry and availability of substitutes. Based onthese criteria oligopoly enjoys substantial market power. In this market condition, a few firmsdominate.When we think of soft drinks industry example, which names come to mind? Pepsi, Coca-Cola. Tyre manufacturers- Dunlop, firestone, dominate. Other examples of oligopoly areIndian aviation Industry, mobile service providers, Smartphone OS, Petroleum, Steel industryetc. Take the case of electricity distribution in Mumbai. Electricity distribution is in the handsof Tata Power and Reliance Energy. This means that these two big players have a lot ofmarket power in deciding the price.Characteristics of Oligopoly: Profit maximization conditions Ability to set price Entry and exit Number of firms Long run profits Product differentiation Perfect knowledge Interdependence Non-Price CompetitionDYNAMICS OF OLIGOPOLY IN THE INDIAN AVIATION INDUSTRY& PRICE WAR:By Tirthankar Sutradhar, 1421427The aviation industry in India, especially with regard to passenger airlines, follows a strictlyoligopoly structure with the characteristics such as:a. An industry dominated by a small number of large firms.b. All airline firms sell either identical or differentiated products (the only differentiationhere being in service quality and frills offered).c. The industry has significant barriers to entry (which holds true both with respect toregulations and huge capital investment required).

2. d. Indian airline industry retains oligopoly due to enormous barriers to entry for newcompetition. Thus, barriers to entry are important to successful operation of cartels.The aviation industry in India used to be exclusively managed by Air India and IndianAirlines and the flying rates used to be high. With the entry of new private airlines like Jet,Kingfisher and Indigo into the aviation industry more competition was infused into the airlineindustry. They started offering various schemes like no frill flights, discount on advancebooking and concessions for frequent fliers which attracted many people to opt for theservices offered by these airlines. This made Air India also to offer similar types ofconcession and facilities to the customers. In this case, we see that the competition was basedon both price wars to some extend and improved services in such way that flying becameaffordable to a larger section of people.Fig reference: http://insighter.me/category/industry/aviation/PRICING WARS: Indian Airlines announced 3-15% cut in fares in June 2002, next day Jet Airwaysreduced prices by Rs.635 for economy class. When an airline carries slashes its price of offers discounts on selected bookings, thesame is followed by the other instantly. For example, in 2013 Indigo followed 1-rupeebase fares for metro-to-metro Diwali bookings when SpiceJet announced the same. In 2014, Air Asia a budget/low-cost carrier, entered Indian Market and offered flightseats for a very low price as compared to its competitors, it was able to pre-book awhopping 28,000 seats in just 48 hours. The other airline carriers delayed too late tocounter the price war thrown by Air Asia and lost business to some extent.India is one of the most expensive aviation markets to operate in the world. State taxes of asmuch as 30 percent make jet fuel, which contributes to about half an airlines costs, thecostliest in the region. That means making money is a struggle. So a price of war to keep theprices low as much as possible results to a net loss to the airlines, though over the last tenyears, the Indian aviation industry witnessed a period of high growth, with total passengertraffic growing at a CAGR of around 18% during 2003-11. Airlines in India have lost acombined 594 billion rupees over the past seven years, CAPA estimates, due to the same. 3. OLIGOPOLY IN SOFTDRINK INDUSTRYBy Neha Thakur, 1421447Three firms control 89% of soft drink sales: 42.8% : Coca-Colas 25 brands and 139 varieties 31.1% : Pepsis 18 brands and 163 varieties 15% : Dr. Pepper Snapple Groups 20 brands and 109 varietiesCoca cola and Pepsi are in an oligopoly market. They are mutually and strategicallyinterdependent, as a decision made by one firm invariably affects the other. They are sellingthe homogeneous product so they can control over price but they will consider their actionwhen they would like to change the price of their goods. They usually change the price oftheir goods according to kinked demand curve. They are using cut-throat competition toattract more potential customer.Normally, both of the firms use low-price strategy at the same time to maximize the marketprofits. Especially when summer holidays arrive, both of the firms use cut-throat pricecompetition to increase their sales so as to increase their profit. Game theory is applied to bea market share. A game theory is a pricing policy and it helps a firm to enhance profit. Thereare high barriers to enter this market. Coca cola and Pepsi have signed a cartel contract. Thetwo firms will become a cartel to avoid other firm to enter this market because it willdecrease their economic profit. Cartel is a small number of firms acting together to limit cost,raise price and increase profit.In 2003 Coke-Cola introduced its affordable pricing strategy in which it drastically reducedits prices to Rs.5. This led to an increase in Coke's market share. The longer Pepsi hadallowed Coke to have an edge over itself in terms of market price the more consumers itwould had lost in the long term. Thus Pepsi was forced to follow as it would lose a massiveportion of the market share, being a close substitute. But these two firms couldnt sustain themarket at such low prices and both withdrew from this lower pricing strategy. Since then (for9 years) the prices have remained stable at Rs.10. Price rigidity in oligopolistic firms can beexplained through the Kinked Demand Curve model. The kinked demand curve representshow the pricing behaviour for each firm is strategic. 4. A reduction in market price in an oligopolistic market structure is always beneficial for theconsumers as it provides them with a variety of cheaper close substitutes. The onlystakeholder with a negative impact would be the firms, as lower prices would mean a lowermargin of profitability. The role of non-price competition is essential in this case. Alsoadvertising can increase competition between firms and contribute in decreasing theirmonopoly power. Although there are some drawbacks for advertising such as it increases thecost of production thus resulting in higher prices for consumers. It creates needs thatconsumers would not otherwise have, resulting in a waste of resources. Successfuladvertising can lead to increase in monopoly power of a firm.OLIGOPOLY IN TELECOMMUNICATIONBy Akansha Sharma, 1421435The telecom industry in India has seen an astonishing growth in the last decade and a half. Itis one of the fastest growing telecom sectors in the world with an annual growth of 15% to 20% . According to the research the market share is as follows: Bharti telecoms AIRTEL leadsthe market share with 24.4% followed by Vodafone India with 19.5% Reliance 14.9%, Idea15.3%, BSNL 8.2%, Tata 7.0%, Aircel 5.3% - the remaining share being held by smalleroperators such as Uninor, Videocon, MTS, Loop and some more. The above mentionedfigures depict that over 80% of the market is held by 7 operators. With this information, thenature of economic structure of mobile telecom industry in India can be described as anOLIGOPOLY.Interdependence: Interdependence in terms of decision making processes. This happensbecause, the number of influential competitors is few, and the change in price or output byany of the firm causes direct effect on the income of its competitor. So demand of the productby the market is not the only criterion that sets up the price of the service. Non-pricecompetition in telecom would include competition over a) better coverage of network b)celebrity endorsements c) branding d) aggressive advertising techniques e) better customerservice f) diversifying into related product line. Non price competition occurs because of thefear of price wars eventually affecting the revenue of a particular firm and also the industry asa whole. The core behind non price competition is the difficulty faced by competitors tocounter techniques like aggressive advertising, personal selling, or improvement in theproduct or service Example Market leader Airtel has always endorsed superstars of Indiancinema with its brand to attract masses. Superstars like Shahrukh Khan and AmitabhBachchan are associated with the brand for a long time. Whereas Vodafone has neverendorsed celebrities to the brand and has rather created animated characters called Zoozoosfor its strong advertising campaign which created a buzz in the market. Both the companieshave indulged in non-price competition of advertising just to lure consumers and target alarger market share.Ability to set price: The dominant firms in oligopoly have the advantage to set the price ofthe product at any hike in price of the product demanded will result in loss of a particular firmas the consumer will shift to the other supplier as he gets the same product at a lesser price.In the case of Indian telecom, the dominant players like Airtel, Vodafone, Reliance or Ideamay settle for a reasonable share of the market, in lieu of their existing market share. Itanalyses the interdependent behavior of the firms in an oligopoly. It indicates the how the 5. choices between operating firms affect the outcome of a game. If any firm raises the priceover and above the existing price, the competitors will not follow this change and the firmwill lose the market share. This would cause the consumers to shift to the suppliers providingthe same service for a lesser price. If any firm lowers its price below the prevailing marketprice, the competitors will also try and match the price to retain the market share. Hence thefirms total revenue will decrease and output will just increase marginally.MAJOR FACTORS AFFECTING TELECOM COSTS THAT EFFECT THE INDUSTRYHigh infrastructural costs To enter service areas, service provider incur huge set up andinfrastructural costs. These infrastructural costs to develop the service involve risks such aslogistical risks, longer time duration to launch the service, setting up of new towers anddearth of highly skilled personnel to develop such infrastructures.Allotment of spectrum by the Government One of the major concerns of the industry is theavailability of the spectrum that is used for the supply of the service. It is provided by thegovernment and has been a controversial issue in recent times for this sector in India. Being alimited resource, it gives a possibility of unhealthy bidding by the service providers resultingin unviable financial approach to the price thus hampering the growth of highly competitivesector.OLIGOPOLY IN STEEL INDUSTRYBy Sreenath Menon, 1421423The steel industry is frequently believed to be an indicator of commercial progress because ofthe critical act frolicked by steel in infrastructural and finished commercial development. Theglobal steel industry is exceedingly cyclical, extremely competitive and yet fragmented inwords of marketplace share. Currently the industry is at the height of the company series andis going through a consolidation period, that could consequence in the tinier contestants beingacquired by the larger ones. The finished output from the industry exceeds 1.4 billion tons in2005, most of it increased by the rise in output from China. This is anticipated to rise more,making steel output from China amid the biggest in the world. The steel industrydemonstrates a high degree of variability, both in words of paycheck and production. Thefactors attributable for steering this variability are globe commercial conditions alongside aparticular sensitivity to the presentation of the automotive, assembly, capital goods andsupplementary manufacturing produce industries. The commodity nature of steel, theproducers and customers limited control on worth, and the demand and supply disparity havemade steel benefits volatile. Significant increases in benefits for metals and power above thepast two years have also contributed to increased variability in the industry.World crude steel output grasped 1,343.5 million metric tons (MMT) for the year 2007. Thisis an increase of 7.5% on 2006. The finished embodies the highest level of crude steel outputin past and it is the fifth consecutive year that globe crude steel creation produced by extrathan 7%.While the overall output stays elevated, 2007 has perceived a tiny slowdown in thedevelopment rate, year-on-year development peaking at the conclude of the early quarter.This slowdown in development was perceived in nearly all the major producing states and 6. spans encompassing China, EU, CIS and the US. The exclusion was in the Middle Eastwhereas creation development accelerated across the subsequent half of the year.Chinas steel creation in 2007 grasped 489 mmt, a 15.7% rise on2006. This embodies adevelopment reduction from the 18.8% attained in 2006, 26.8% in2005 and 26.1% in 2004.The slowdown in 2007 was most seeming across the last quarter, alongside an 8.6%development rate. Though, China stays the steering power behind the still forceful globecreation figures. Lacking China globe crude steel creation would have merely grown at 3.3%.Supplementary BRIC states additionally upheld moderately elevated growth, with India andBrazil recording 7.3% and 9.3% increases respectively. In Russia creation development wasflat from the conclusion of the subsequent quarter managing to an annual growth figure of2%. The BRIC allocate of globe creation has been producing rapidly since 2000. It has grownfrom 31% of finished in 2001 to 48.2% in 2007. Steel creation in the EU (27) from thesubsequent quarter stayed stable, alongside year-end figures of 210.3mmt, a 1.7%development above 2006.In the US steel creation displayed negative development in the earlythree quarters but showed a turnaround in the fourth quarter alongside three consecutivemonths of growth. Finished crude steel creation for the US was 97.2 mmt, a 1.4% reductionon 2006 figures.After the news came out that Tata is seizing above Corus it was not consented by the publicor rather the financier in a affirmative way. The stock worth dropped by concerning 7% in 15days time. The deal was finalized at concerning 18.2 billion dollar. This counselledacquisition represents a delineating moment for Tata Steel and is completely consistentalongside the strategy of development across global development. This made Tata the 5thlargest steel producing country in the world. The sales have increased to Rs 63,587/- croresfor the early half of FY08.Hoping that supplementary steel manufacturers and associates of the steel transactions shouldadditionally display a sense of company obligation by rolling back their benefits in theattention of curbing inflationary trends. Merely Ispat Industries came out in prop, confessingthere was a case for a reduction in benefits in the internal marketplace to manipulationinflation.Demand increased from 850mmt in 2000 to 1060mmt in 2005 to 1155mmt in 2007 whereassupply increased from 840 in 2000 to 1070 in 2005 to 1185 in 2007 the main reason for thischange is due to the rising demand for the steel all above the world. The main reason is due tothe rising demand for steel in China supplementary Asian states.A demand forecast for the so-called BRIC economies (Brazil, Russia, India, China), whichcontain rather disparate outlooks as regards steel consumption. According to the IISI, theBRICs will jointly give roughly three quarters of globe consumption growth in both 2007and 2008. In Brazil, steel use is anticipated to increase 15.7% in 2007and 5.1% in 2008. ForRussia, the figures are an astounding 25% in 2007 and 9.5% in2008. For India the conjecturesfor the two years are suitably 13.7% and 11.8%, and for China 11.4% and 11.5%. 7. OLIGOPOLY IN SMARTPHONE OPERATING SYSTEMSBy Vikas R, 1421430The smart phone market is similarly dominated by a handful of companies, the most powerfultwo being Google Android and Apple iOS. Those companies have deep relationships with thehandset providers and are able to have their system pre-installed on each phone. As withcomputer operating systems, these relationships become self-reinforcing as they grow.Android still leads the pack in terms of pure penetration as of this past June, it accountsfor 51.8% of smartphones in use (up from 50.4% in Q1 2012) with Apples iOS right behindit at 34%. Dont feel too bad for Apple though, as they still have the highest manufacturershare by far (34% in Q2), with Samsung at a distant second.That those two platforms still hold first and second place shouldnt come as surprise, andtheir slight gains come at a cost. Nielsen has RIM still clinging to third place despite anotherquarterly drop, as it now accounts for 8.1% of smartphones in use. Meanwhile, the rest of thecompetition languishes below 5% as of Q2 2012.Its that part of the market that seems the most interesting right now, as theres still plenty ofroom in the market for a third strong mobile ecosystem to emerge while Apple and Google 8. continue to slug it out. The question though is what that third platform will be, and there areno clear indicators to be found in Nielsens data.OLIGOPOLY IN PETROLEUM INDUSTRYBy Tom Thomas, 1421428Oligopoly is an industry where a few sellers can influence the market price and quantities andthis is true in the case of petroleum producing countries as there are few sellers and theycontrol the supply and somewhat prices in the petroleum market. The bad effects of anoligopoly start when they try to act as a monopolist and try to raise the price and restrict thequantity. For that they form a cartel.Hence oligopolies harm us when they form cartel and the harm is that they raise the price andlower the quantities which reduces the consumer and social surplus. And especially in thecase of petroleum products that are bottle neck industry i.e. the effect on their prices will bemultiplicatively translated towards all the other industries.If petroleum was not an oligopoly then many of the past inflationary and recessionaryexperiences that world has faced might not have occurred. Even the current hike and fall ofoil prices has shocked and toppled the economies of many countriesPetrol companies have the market structure of an oligopoly. An oligopoly is a market structure wherethere are a few dominant firms whose behaviour is interdependent. There are a few dominant firmsrelative to market size, and they each command a large proportion of the market share, thus havingstrong monopoly power. Examples of petrol companies include Shell, Caltex and Exxon Mobil. Theirdemand curve is downward sloping, meaning that they are price setters.Petrol is a homogeneous product; hence the oligopoly is known to be pure or perfect. Theoreticallyonly one firm can prevail, but since the firms demand is not perfectly elastic, the firm has pricecontrol over its pricing policy. There is a great fear of rivals reactions to each respective firmspricing strategies due to petrol being undifferentiated. 9. There are also huge barriers to entry in an oligopoly. These barriers can be both natural and artificial.The few dominant firms in the oligopoly enjoy substantial internal economies of scale as they areoperating on a larger scale, allowing the cost of the firm to fall continuously over a very large output.An example is in power and utilities. They have a large minimum efficient scale relative to marketdemand. Hence, it is difficult for a new entrant to produce at such a low unit cost, as its scale ofoperations would be much less than the existing dominant large firms, thus unable to competeeffectively with the incumbents. This natural barrier thus discourages potential new firms fromentering. In addition, the incumbent can deliberately reduce the price of its products to ward offpotential entrants.The dominant firms can gain control of the market through product differentiation, which seeks toconvince or persuade customers that there are no close substitutes for the firms products.SUMMARY AND CONCLUSIONExperimental oligopoly markets have been investigated here in a controlled setting modelled after aprice-setters' oligopoly market. A stronger conclusion may be drawn than that reported by Siegel andFouraker: a decrease in the number of firms in a market produces less competition which cannot beattributed to differences in the structure of the profit functions. These results suggest that tacitcollusion is possible and more likely to occur in an oligopoly market with a small number of firms.All of the markets converged to prices in or just below the cooperative-non cooperative range. Thenumber of firms in the market had a significant effect upon average profit and price under bothinformation states. Although information did not affect mean price and profit significantly, it did havea significant effect upon the variances of price and profit. Information seems to induce bargainingattempts that tend to result in price war or collusion. Thus, information is likely to increase thevariability among markets, but should reduce the variability within one market over time.REFERENCE1. http://pearsonblog.campaignserver.co.uk/?p=3192. http://timesofindia.indiatimes.com/3. http://wikieducator.org/Oligopoly4. Anderson, Simon P., Andre de Palma, and Jacques-Francois Thisse. 1992. Discretechoice theory of product differentiation. Cambridge: MIT Press.5. Basuroy, Suman, and Dung Nguyen. 1998. Multinomial logit market share models:Equilibrium characteristics and strategic implications.6. http://www.bloomberg.com/news/2014-06-11/airasia-debuts-amid-price-war.html7. http://en.wikipedia.org/wiki/Oligopoly8. Biehal, Gabriel, and Dipankar Chakravarti. 1983. Information accessibility as amoderator of consumer choice. Journal of Consumer Research 10:114.9. Briesch, Richard, Lakshman Krishnamurthi, and S. P. Raj. 1997. A comparativeanalysis of reference price models. Journal of Consumer Research 24:20214.10. Chintagunta, Pradeep K. 1993. Investigating purchase incidence, brand choice andpurchase quantity decisions of households. Marketing Science 12:184208.