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Oligopoly is the ideal market structure because it allows society to benefit from the efficiency gains of both competition and monopoly - Essay Example
Outside the admittedly important field of statutory organizations, instances of pure monopoly (sole buyer or seller of a product or service without close substitutes) are rare, particularly in the provision of trading services. A more prevalent form of market situation is one in which there is a small number of buyers or sellers, each of whom handles a large share of the total supply and therefore has certain attributes of monopoly and monopoly power…
The range within which each oligopolist can independently influence prices is, however, narrower than where there is a pure monopoly, for he has to take into account not only the availability of substitutes (as does a pure monopolist as well), but also the likely actions of his principal competitors in his own market.
In all circumstances price changes are likely to affect adversely the interests of certain participants in the market. Increases in price naturally are harmful to consumers, while decreases injure the interests of producers and of some traders. In monopoly and oligopoly situations the power of firms to influence prices, coupled with a high degree of dependence on these firms, tends to provoke allegations that all price changes are deliberately engineered to injure certain interests. Consumers, producers or rival traders may consider that they have been specially and deliberately injured by the actions of the monopolist or oligopolists, and may ascribe market changes to their intentional activities. Plausibility is lent to these views because in these situations the firms can undoubtedly influence the market; indeed, they cannot help doing so. ...