The Power of the Oligopoly
Before we can start discussing the US Cottons Industry transformation into an oligopoly industry we need to define some key terms. Oligopoly is defined by Nilsson in Capitalism: Power, Profits, and Human Flourishing as “a few sellers dominate the market. An oligopoly market might have dozens or even hundreds of individual firms but most of them are unimportant in the industry; a small number of them—perhaps only 2 to 20 firms—dominate the industry.” Industry is defined by Investopedia.com as” A classification that refers to a group of companies that are related in terms of their primary business activities. In modern economies, there are dozens of different industry classifications, which are typically grouped into larger categories called sectors. Individual companies are generally classified into industries based on their largest sources of revenue.” A Cartel is defined by John Duffy in Cliff Quick Review Economics as “a group of firms that gets together to make output and price decisions. The conditions that give rise to an oligopolistic market are also conducive to the formation of a cartel; in particular, cartels tend to arise in markets where there are few firms and each firm has a significant share of the market. In the U.S., cartels are illegal; however, internationally, there are no restrictions on cartel formation.” Finally, a supply chain is defined by Geringer, Minor, and McNett in M-International Business as “the process of coordinating and integrating the flow of materials, information, finances, and services within and among companies in the value chain from suppliers to the ultimate consumer”
The definition of the term Oligopoly gives the general framework of the Cotton Industries Organ...
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...r for profits or jeopardizing their businesses.
In conclusion oligopolies possess natural protections not found in other arrangements. Cotton, Telecommunications, and Oil represent three different forms of oligopoly which possess unique benefits but hold true to the fundamental benefits of this model of reduced risk from both internal and external forces. As the world becomes smaller and there is a greater integration and collaborations between companies oligopolies of different types, even some yet to be conceived may arise. The prospect of this arrangement is not farfetched since governments with fundamentally different believes and agendas all over the world have collaborated in a very similar arrangement to form massive trading blocks. If companies which are more similar than these companies can accomplish this feat the sky is the limit for the oligopoly model.
During the nineteenth and twentieth century monopolizing corporations reigned over territories, natural resources, and material goods. They dominated banks, railroads, factories, mills, steel, and politics. With companies and industrial giants like Andrew Carnegies’ Steel Company, John D. Rockefeller’s Standard Oil Company and J.P. Morgan in which he reigned over banks and financing. Carnegie and Rockefeller both used vertical integration meaning they owned everything from the natural resources (mines/oil rigs), transportation of those goods (railroads), making of those goods (factories/mills), and the selling of those goods (stores). This ultimately led to monopolizing of corporations. Although provided vast amount of jobs and goods, also provided ba...
Unfortunately, these monopolies allowed companies to raise prices without consequence, as there was no other source of product for consumers to buy for cheaper. The more competition, the more a company is forced to appeal to the consumer, but monopolies allowed corporations to treat consumers awfully and still receive their business. Trusts were bad for both the consumers and the workers, but without proper representation, they could do nothing. However, with petitions, citizens got the first anti-trust law passed by the not entirely corrupt Congress, called the Sherman Act of 1890. It prevented companies from trade cooperation of any kind, whether good or bad. Most corporate lawyers were able to find loopholes in the law, and it was largely ineffective. Over time, the Sherman Anti-Trust Act of 1890, and the previously passed Interstate Commerce Act of 1887, which regulated railroad rates, grew more slightly effective, but it would take more to cripple powerful
To differentiate monopolies from trusts, it must be said that single companies were able to form monopolies when in control of “nearly all of one type of product or service… [This] affects the consu...
...tually break up monopolies when they formed, by specific legislation” (600). They see that the government is letting the business tycoons to own whatever land they want and extend their fortunes. Unlike the first two books, Johnson’s book discussed the history of the book without bias and from a different perception; one that was not came from an American view.
Just as certain conditions existed for a perfectly competitive market, the same goes for the monopoly form of a market. The first condition exists when only one firm operates in the market. Due to this condition, the monopoly firm equates to the market, meaning the firm sets whatever price it desires. The next condition pertains to barriers of entry. Barriers to entry occur when the monopolizing firm prevents any other firm from entering the market. Many ways of doing this exist, one way will be examined when looking at the corn market. The last condition of a monopoly occurs when no close substitutes can be found. This states no other product has the potential to substitute in place of the firm’s product. These condition apply to the corn market in Tap. The Mega Company remains the only firm selling corn in the market. They achieve this by purchasing all of the farmers’ corn and then selling it in the market. This outcome satisfies the first condition. The second condition exists as barriers of entry. The Mega Company produces this effect by buying corn from all of the farmers. The farmers sell their corn to the Mega Company at a higher price than selling it directly to the people at market value. This allows the Mega Company to purchase all of the corn from the farmers, producing a barrier to entry in the market. In order for the Mega
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
An oligopoly usually consists of two to ten companies that are selling products with little to no differentiation. While the companies do hold some control over the price of the product they are selling, it is mostly dependent of the pricing of the competitors’ product. The companies in an oligopoly rely heavily on advertising and marketing their products to appeal to consumers. This is because all the companies in the oligopoly have to try to stay a step ahead of their competitors in order to appeal to consumers (S, S.). An example of an oligopoly is the cell phone industry. Verizon, AT&T, Sprint, and T-Mobile are the four dominating competitors in the market. These four companies are the only ones offering a reliable plan, at a (not so) decent price. They are constantly advertising, it seems as if every other commercial and ad you see is for one cell phone company or another, for one outrageously expensive plan or another. This goes to show that just because there is some semblance of competition between companies in a market, does not mean that consumers will be receiving a fair price on a product or
Oligopolists are drawn in two different directions, either to compete with each other or to collude with each other. If they collude, they end up acting as monopoly and thereby maximising the industry's profits. However they are often tempted to compete with each other inorder to gain a bigger share of the profit of the industry.
The essential factor of an oligopolistic firm is interdependence. Oligopoly involves few producers, which means more than one producer as it is in pure monopoly but not so many as in monopolistic competition or pure competition where it is difficult to follow rival firms’ actions. Therefore, due to small number of producers on oligopoly market, the price and output solutions are interdependent. As a result, firms can cooperate or come to an agreement profitable for everyone. Therefore, they can increase, as it is possible, their joint profits (Pleeter & Way, 1990, p.129). Further, oligopoly is divided on pure, which is producing homogeneous products, and differentiated, producing heterogeneous products (Gallaway, 2000). Economists Farris and Happel insist that the more the product is differentiated, the more firms become independent, and the more the product differentiation, “the less likely joint profit maximization exists for the entire group” (1987, p. 263). Consequently, it is worth to be interdependent.
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
An oligopoly is likely to occur in the sugar refinery, to which raw sugar is transported from sugar mills overseas. Sugar refineries are also expensive to operate due to machinery and transport costs so barriers to entry are high. It is likely there are a small number of firms operating sugar refineries scattered across the
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
The beer market has turned itself into an oligopoly in the past 100 years. Where there once were hundreds of brewers across America, there now are just a few major players in the industry. But what is an oligopoly? As defined by Ayers & Collinge in the textbook Microeconomics, “an oligopoly is characterized by multiple firms, one or more of which will produce a significant portion of industry output”(microeconomics). Oligopolies exist where a few large firms producing a homogeneous or differentiated product dominate a market. There must be few enough firms so that they are mutually interdependent, which means they must consider rival’s reactions in response to decisions about prices, output, and advertising. The causes of the beer oligopoly are as followed: 1. Economies of scale exist, which indicate that a few large firms would be more efficient that many small ones. 2. A high degree of capital investment required. 3. Other barriers to entry may exist like patents, control of raw materials, large advertising budgets, and traditional brand loyalty.
A monopoly is the control or possession in the supply or trade of a commodity or service. Monopolists tend to keep prices high and restrict outputs showing little or no responsiveness to the needs of their customers. Because of this, most governments tend to control monopolies to keep them in check. However, most governments tend to create monopolies for national security, for competing economically internationally, or where most producers would be wasteful or pointless. While monopolies exist in varying degrees, no firm has total monopoly in this era of globalization.