The main difference between oligopoly and monopoly is that monopoly takes place when an individual company produces goods with no similar or close market substitutes, whereas oligopoly takes place when several relatively large companies produce similar goods with slight differences. Índice In both cases, oligopoly and monopoly are economic market conditions. Monopoly simply refers to the dominance of a single seller in the market, while oligopoly is a market condition situation where a number of producers compete in the market. Key Areas Covered1. What is Oligopoly Key TermsOligopoly, Monopoly, Market Structure  What is OligopolyOligopoly is a market condition where a small number of sellers co-exist within the market. A market where oligopoly exists is relatively consumer-friendly. This happens mainly as a result of the competition among the sellers. This competition also leads to creating moderate prices and several choices for the consumers. In brief, within an oligopolistic market, a sale or a production decision made by one producer or a seller directly and largely affects the operation and the performance of the other producers or sellers. Furthermore, within an oligopolistic market, a particular source of power does not exist. The oligopolistic market exists completely as a result of the cooperative nature of other sellers. In brief, oligopolistic markets, therefore, maintain fair prices for consumers mainly due to the prevailing competitiveness. What is MonopolyThe main characteristic of a monopolistic market is that it is mainly controlled by a single seller. That seller has the power to influence the market decisions and prices. In a monopolistic market, the consumers usually have limited choice, and they have to choose from whatever is supplied. In simpler terms, the monopolist possesses all the power, whereas the consumer lacks the power of making choices. A monopolistic market obtains its power mainly through three sources: legal, economic, and deliberate. A monopolistic seller will use his position to its advantage. He will chase out the competitors by reducing prices to such an extent that survival in the market becomes impossible for the fellow sellers. Furthermore, economic conditions like a large capital requirement for startup companies and. legal barriers such as intellectual property rights become beneficial for the monopolistic authorities to maintain their power. In addition, a monopolistic market may often demand high prices. Since there is no other competitor to challenge them, monopolistic sellers would use their power of dominance to maximize their profits.
Oligopoly is an economic market condition where several sellers compete with each other to sell a product with slight differences inside the same market. On the other hand, monopoly is an economic market condition where a single seller or a limited number of large firms predominate the market. PricesMoreover, within an oligopolistic market, the competition among the sellers leads to generate moderate and fair pricing. On the contrary, within a monopolistic market, higher prices will be charged, mainly due to the lack of competition found there. CharacteristicsWithin an oligopoly, a small number of firms compete with each other based on product price, customer service, product differentiation etc. When it comes to monopoly, a single firm controls a large market share as it allows to set prices and earn the highest profit. ConclusionIn brief, the main difference between oligopoly and monopoly is that within an oligopolistic market, several sellers compete to sell relatively similar products with slight differences, whereas within a monopolistic market, there exists one dominant seller who handles the market pricing in a way that the flow of profits is only directed towards his firm. Therefore, unlike in an oligopolistic market, within a monopolistic market, we cannot observe much competition. Reference:1. “Monopolistic Markets – Overview, Characteristics, and Regulation.” Corporate Finance Institute, 3 Feb. 2021. Image Courtesy:1. “Market Structures” By RHECON3430 – Own work (CC BY-SA 4.0) via Commons Wikimedia Similarities and Differences between Monopolies and Oligopolies What are some similarities and differences between monopolies and oligopolies? According to Mankiw, N. G. (2004) monopolies and oligopolies can be defined as: Monopolies are based on a market where there are several buyers but only one seller of a product or service whereby the seller sets the price for products and services provided. Oligopolies are based on a market where there a few companies own or control the production of a product or service whereby the few companies control the market of products and services provided. Differences: Monopolies have only one seller. Oligopolies have at least two or more sellers. Monopolies offer only one product or service. Oligopolies offer more than one good or service. In monopolies the seller can set the price without competition. In oligopolies the sellers set prices based on competitor prices. Monopolies usually exceed marginal profits. Oligopolies usually meet marginal profits. Monopolies are unable to achieve any level of profit they want due to high prices that reduce consumer purchases. Oligopolies have a better chance of achieving the level of profit desired because prices are lowered to raise consumer purchases. Monopolies usually have no close substitute for products or services offered. Oligopolies usually have a small number of close substitutes for products or services offered. Similarities: Both monopolies and oligopolies consist of large organizations Both monopolies and oligopolies hold considerable market control over specific products and services. Both monopolies and oligopolies hold specific copyrights for products and services provided. Both monopolies and oligopolies are affected by increased production in the fact that higher production reduces the price of products and services. Both monopolies and oligopolies are able to achieve a monopoly on production id specific products or services under copyright. Both monopolies and oligopolies impact the production and... Market structure in economics determines the demand and supply of the products in the market. We buy certain types of products from certain markets, for instance, Buying an iOS phone from an iPhone shop. In the market structure, firms sell their product either homogeneous or differentiated to the customers under perfect competition, monopolistic competition, monopoly, or Oligopoly. Different characteristics are played under different types of market structure as it depends on the nature of product, entry and exit, the number of sellers or buyers, and price determination. Oligopoly vs Monopolistic CompetitionThe main difference between Oligopoly and monopolistic competition is the number of sellers in the market. Additionally, there are numerous differences stated between oligopolies, and Monopolistic are entry and exit of firms, price determination, the status of the firm with other firms- Whether independent or dependent, and the basis of products. Oligopoly comes under perfect competition where products are sold either homogeneously or differentiated. An oligopoly market imposes proscriptions on the entry and exit of firms as their actions are interlinked from one firm to another one. Oligopoly covers small sellers of large firms. For instance, automobile companies sell cars either in a similar model or in any upgraded model. Monopolistic competition is an imperfect competition market, which has many firms selling differentiated products with a close substitute. Those firms are independent in determining the price, demand, and supply of certain products. Entry and exit of firms under monopolistic competition are done freely without any government involvement. Furthermore, Monopolistic competition is subsumed by many firms, where each MC firm sells a similar product. On the other hand, other MC firms sell their selected similar product. Comparison Table Between Oligopoly and Monopolistic Competition
What is Oligopoly?Oligopoly market is one of the market structures under perfect competition, where a few numbers of sellers gather together of large firms and sell similar or homogeneous products to the customer. Oligopoly has stringent barriers to the entry of new firms or the departure of any existing firms. Those barriers are government license, access to expensive techniques or economics etc. Moreover, government regulation will not allow new firms into oligopolies because of high competition. This way, oligopoly markets are long-run abnormal profit because of the restriction on competitors. The seller is the price setter under an oligopoly market, as they are interdependent from one firm to another. Buyers have imperfect knowledge about the price and product quality because their inter-firm information is bungling. Besides, Oligopoly drives customers through selling costs that are advertisement, campaign, or loyalty schemes. To sum up, an Oligopoly is a market structure where a small group of large firms (interdependent) sells analogous or differentiated products to customers. What is Monopolistic Competition?Monopolistic competition is an imperfect market structure where many firms compete with each other by selling differentiated products with a close substitute. The entry and exit of firms under monopolistic competition are free, so this leads to a high degree of competition, whereas those firms sustaining loss can freely depart the market. Monopolistic competition is independent firms, where they are the price setter as they sell certain products within the MC group to compete with other MC groups who are selling differentiated products. Monopolistic competition faces inefficiency in the market as the price exceeds the marginal cost of a product as they spend more on selling costs to get publicity in the market. Restaurants are great examples of monopolistic competition as they vend food by altering something like the way of serving or packaging, but the food taste of one MC group may differ from another MC firm. Exterlopulate the concept of monopolistic competition. Many firms are involved in selling only differentiated products in order to compete with each other. Main Differences Between Oligopoly and Monopolistic Competition
ConclusionOligopoly is perfect competition where few sellers of large units vend either homogeneous or differentiated products, proscribed to enter new firms and departure of existing firms. Oligopoly is interdependent as one firm action influences another’s firm action. Moreover, Oligopoly has perfect knowledge of the products and customers because they sell similar products. Monopolistic competition is an imperfect competition where many firms only tout differentiated products, free to enter and exit any new firms as well as existing firms in the market. Besides, Monopolistic competition is an independent market, where the action of one’s firm doesn’t impact another’s firm action. And those firms can decide the price setting of the product as they are independent firms. References
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