Why do oligopolies exist? Explain if you regularly purchase products owned by an oligopoly.
Your initial reply should be no less than 200 words. Then Also Reply to the two peers below.
1. The reason the oligopolies exist is because of company collaboration, now what this means is sometimes companies will see more of a financial benefit from collaborating with another company in the creation of a good or product than if the company were to decide to create the product alone and compete with the other competitors, also oligopolies can also be a company that is dominating a market. An example of an oligopoly that I frequently purchase products is Starbucks, this is considered an oligopoly because it dominates the market of not only coffee but other beverages as well, the reasoning behind this is that Starbucks has little to no competition, because its beverages have a more targeted demographic that keeps coming back for more, they have created a well known and reliable customer base that won’t normally go to other competitors because of their dependability and their competitive ability making it more likely for them to be chosen over another company. This is only one example of a well-saturated array of examples that can be used to describe Oligopolies, this is just one that I frequent myself, but I’m sure if any individual were to look into the companies and places they visit or purchase from frequently they would see that oligopolies are quite common.
2. There are a number of reasons why oligopolies exist, with economies of scale likely being the most prevalent. Only very large enterprises are able to produce at the lowest average cost if these factors are significant, as they are in the automobile sector, for instance. Because of this, it is practically impossible for new companies to enter the market. While starting at the required very large scale would require far more capital than an unestablished firm is likely to be able to raise before proving it will be successful, a small firm would not be able to produce at the lowest cost and would quickly be forced out of business. Other entry-level barriers include oligopolist patent ownership and perhaps aggressive advertising that prevents would-be newcomers from becoming recognized by the general public. The desire to unite is the last urge. By giving the burgeoning oligopolists more monopoly power, mergers have the obvious advantage of reducing competition. Additionally, they might lead to additional economies of scale, raising the barrier to entry for new competitors. Manufacturers of autos, ovens, refrigerators, personal computers, gasoline, and courier services are among the oligopolies we deal with. Oligopoly differs from monopolistic competition in that it has few enterprises as opposed to many, is mutually dependent on prices, has differentiated or homogeneous products as opposed to all having differentiation, and has severe entrance barriers. Both actively compete in non-price-based markets.