Monopoly and oligopoly essay Essay Example for Free

Monopoly and oligopoly essay EssayThe Main characteristics of an oligopoly be that the supply of a product or products is concentrated in the hands of a few big suppliers, there could be thousands of fiddling suppliers but the merchandise is mainly dominated by around 4 or 5 large firms. For fashion model firms Tesco, Asda, Sainburys and Morrisons, these are the 4 main super trades in the UK but there are thousands of small quoin shops who provide some of the kindred level-headeds the supermarkets do. Another characteristics of an oligopoly is interdependence, this is when the actions of one large firm will directly claim another large firm of the same market. For example during the Christmas period Tesco lowered the price on certain(p) alcoholic drinks to pull customer in to the stores to buy their Christmas food shopping, Asda then followed suit and did the exact same thing with the same products. On the other hand if firms raised their prices the other firm are very unlikely to copy, the other firm are more than likely to advertise the fact they are this instant cheaper in the hope of gaining a bigger share of the market. However there is a tendency for firms to interact and agree to raise prices together, this maintains their abnormal profits and ensure no one loses.This behaviour is illegal in the UK and the EU and firms caught doing this will be heavily fined. drawframe Oligopolys are a few firm dominating a market,a monopoly is a single firm dominating a market or being a sole supplier of a market, this is called a pure monopoly. An example of a pure monopoly would be Scottish water they are the sole provider to every phratry in Scotland of running water. drawframe drawframe For any firm profit is a must for a business to survive, firms will look in to other parts of a market to gain emf profits.For a firm to move into a particular sector of a market there would have to be good roles of profit. A firm would have to get a good return o n their investment, the higher the risk and longer a firmhas to wait to earn a potential return on their capital, the greater the minimum required return on their investment they will demand. For a firm to move in to a particular sector,firms would also have to consider if this would attract impertinently investors. If the firm was going to make a quick return on its investment this would attract more investors as they would gain higher amount of dividends on their investment.