Advantages Of Oligopoly

Airplanes have always been at the forefront of technological change. After all, the science behind flight is something that is continually evolving and through research is being improved. Because of the specialized nature of airplanes, it serves to reason that its market structure is decidedly different from automobiles or other forms of transportation. Airplanes are widely used, however their manufacturing process is concentrated in only a few companies because of barriers to entry such as capital, technology, and time. In fact, today, there are only two major companies which manufacture large commercial airplanes (more than 100 seat capacity). This market structure is a subcategory of an oligopoly, defined as a market in which a small number of interdependent firms have the majority of market share. The airplane manufacturing market only has two major players, hence a special designation as a duopoly. An oligopoly, or in this case a duopoly is a type of market structure characterized by high barriers to entry, product differentiation, and interdependence. In the case of aircrafts, these barriers take the form of large capital investments of both time and money, and of course the economies of scale. Aircraft manufacturing today requires a tremendous amount of capital spending for research and development to even begin to design and build the planes. The R&D process can then take years to come into fruition. Only a

However, it was not always this way. Previously, there were a multitude of companies representing a more competitive marketplace. Over the years this came down to three; Boeing, Lockheed Martin, and McDonnell Douglas. Eventually Lockheed dropped out and McDonnell Douglas merged with Boeing. In the meantime, France, Germany, and the U.K came together to form and subsidize an aircraft manufacturing company, Airbus. (Leung, 2013). This gave rise to the modern duopoly of this