In between these two transactions, Grasim (an Aditya Birla company) acquired the cement operations of L&T, which is UltraTech today. That was the initial consolidation in the sector at the top, one that has stuck. In this digital landscape, where data is the new currency, vigilance and thoughtful regulation are essential to ensure that consumer choices remain uninhibited and fair.
Fixing of products price:
For example, over the last three years, entry level telecom tariffs have increased 340 per cent, from Rs 35 to Rs 155. Cost of digital TV recharge has also increased three folds over the last five years. The bigger players have access to massive capital, advanced technology, and extensive distribution networks, which is outside the reach of the smaller players. However, the survival of small and medium enterprises (SMEs) is crucial for job creation and sustaining mass consumption. Drawing from China’s experience, it’s evident that technology plays a pivotal role in propelling any nation to the forefront of manufacturing. Each of these companies could be considered part of an oligopoly in their respective industries.
Answer the following question.Elaborate three main features of a monopoly form of market. Product differentiation is not possible under perfect competition. Operating systems for smart phones and computers provide excellent examples of oligopolies in big tech. Apple iOS and Google Android dominate smart phone operating systems.
Comparison with Perfect Competition
Thus, the contribution of rural areas to total sales has climbed from below 10 per cent to per cent for Pepsi in the last couple of years. The latest move to reduce price to the consumer was followed by Pepsi in April,2003 when it reduced the price of its 300 ml returnable glass bottle segment from Rs. 8 to Rs. 6 and priced 200 ml bottle at Rs. 5. Coke wanted to push the 200 ml “Chota Coke” pack in summer since they wanted to gain volumes so they priced 200 ml at Rs 5/-“. Coke followed Pepsi in each of the above moves in order to reduce the cost per glass to the consumer. The case of Shamsher Kataria v. Honda Siel Cars India Ltd. and Others10 serves as a poignant example of how the CCI has taken action against anti-competitive practices.
Market Structure: Oligopoly Economics Optional Notes for UPSC
The number of firms is limited in the case of oligopoly which becomes a disadvantage for the consumer. In many cases, the consumer has to choose the firm which is the least evil in the case of providing services. For example, an oligopoly firm price for output is 20 per unit, and they sell 240 units of production. The dotted line represents the discontinuity of the MR curve.Because of the firms equilibrium at output ON and where the MC curve is intersecting the MR curve the discontinuity of the MR cost curve is drawn.
Navigating the Digital Landscape: Big Data’s Influence on Consumer Choice
Unlike a monopoly, where a single corporation dominates a certain market, an oligopoly consists of a select few companies. Combined, these companies exert significant influence over a market or sector. When companies within the same industry work together to increase their mutual profits instead of exclusively competing with one another, it is known as an oligopoly. Oligopolies are observed throughout the world and even appear to be increasing in certain industries.
- Earlier this week, in a move that has significance for the Indian cement sector, the Adani Group announced its acquisition of Switzerland-based cement major Holcim’s Indian assets.
- The majority of the industries in the U.S. have oligopolies that are dominated by a few large corporations.
- In recent times, the tariffs of these firms have increased based on each other.
- Calculated by summing the percentage market share of the top four firms, this ratio serves as a gauge of market competitiveness.
- If one firm lowers the price, its sales will increase due to a rise in demand by consumers.
With a few powerful companies dominating smaller entrants, classic examples of oligopoly are airlines. Two of the top airlines, namely IndiGo and Air India, have taken over the airway world with their impeccable price points and services but offering similar benefits. They have the largest market shares and can often merge their services and prices to offer similar advantages for the consumers without wiping each other out, trying to outshine one another.
Between them, ACC and Ambuja have 65 million tonnes of annual cement manufacturing capacity. As a combine, this is next only to the 120 million tonnes of UltraTech, from the Aditya Birla Group. Over 1999 and 2000, the Tata Group sold its stake in ACC to Ambuja.
Profits and their way of running the firm guarantees the results. In an oligopoly market, huge or big companies have control over the entire market. Because of this, any new or small businesses with new ideas cannot break into the marketplace. There are only a few firms in the market which makes consumer able to compare the prices of different firms. Due to this reason, firms make sure to keep their prices low as much as possible. As a result, the consumer gets the product at the lowest prices.
In an oligopoly market, price competition and product competition is equally important. Every firm focuses on pursuing the consumer with new and different features, every time company comes up with a new thing in the market. An Oligopoly Market is a system of Markets where there are more than one Vendor (or firm) for trading of a particular good but there are very few Vendors. This is imperfect competition as the decision of one Vendor affects the decision of others in the Market, although the competition is very limited. The main characteristics of this type of Market is the interdependence of the Vendors that urge them to collaborate and compete with each other to control the Market, affecting the demand and supply based on the prices. It is not possible to determine the demand curve in this market.
Stackelberg model is a sequential move game model in which one firm sets its output before the other firms do . Introduced in 1934 , this model has two firms deciding the quantity to be produced sequentially selling the homogeneous products . The market share of firm A and B are the same which means the demand is also the same for both of these firms.
As discussed before price in an oligopoly is fixed with the mutual understanding between the firms and neither of the firms indulge in reducing prices. It has disadvantages to the economy, consumers, and the firm as well. Due to less number of sellers in the market, the competition gets more intense; and, because of intense competition in the market decision of one firm affects the entire industry. Which makes the firms to keep in check with other firms activities and behaviour.
Consequently, it becomes difficult to draw any specific demand curve for this market. In spite of increasing demand, the oligopolistic nature of the cement sector gives manufacturers the ability to calibrate prices by controlling supply. The presence of large unutilized capacity also reinforces supply not being fully responsive to demand. Over the past decade, cement prices have mostly fluctuated along with global commodity cycles, with increased input costs translating to higher prices.
- Because there is no dominant force in the industry, companies may be tempted to collude with one another rather than compete, which keeps non-established players from entering the market.
- In the Indian automobile market, OEMs often function as de facto monopolists in the spare parts and repair services market for their own brand of vehicles.
- Tesla is stilling toying with the idea whether to start manufacturing in India.
- The cumulative wealth of pharma billionaires doubled after 2018, and 15 of India’s top 100 billionaires are from the sector.
In August 2024, a federal judge ruled that Google, owned by parent company Alphabet Inc. (GOOG), engaged in illegal practices to maintain a monopoly over online search. Though the ruling didn’t contain remedies or a decision to break up Google, it was widely seen as a major moved toward breaking up or limiting the power of big tech firms through antitrust action. For example, if an airline cuts ticket prices, other players typically follow suit. But because the only competitors are a small number of airlines, and customers who need to travel long distances or overseas don’t generally have options other than flying, prices still stay relatively high.
Sony, Japan also snapped ties with Zee Entertainment, scrapping the much hyped $10 billion deals. Tesla is stilling toying with the idea whether to start manufacturing in India. Vodafone has announced its decision to cease further business operations in India.
The large firm will often simply purchase the up-and-coming small firm. Or the large firm or firms may rely on its established relationships with customers or suppliers to limit the activities of smaller firms. But neither of these three companies leads in shareholder returns delivered by top cement manufacturers. That mantle goes oligopoly examples in india to Shree Cement, the largest cement manufacturer in north India, whose stock price has grown at a CAGR of 38% during this period, though amid very thin trading volumes.