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...
Many companies and individuals have committed monopolies before they were considered illegal and afterwards. A monopoly is when one person has complete control over a company and makes close to 100% of the profits. Since The Sherman Antitrust Act passed on April 8, 1890, “combination in the form of trust and otherwise, conspiracy in restraint of trade;” monopolizing an industry became outlawed. In simple terms the act prohibited any forms of monopoly in business and marketing fields. Monopolies committed before the Act, at the time, legal, but unethical, some famously known marketers like John D. Rockefeller became extremely wealthy. While others took full control of corporations after The Sherman Antitrust Act caused a firm like Microsoft
Second: The break of monopolies or “trustbusting” began in the late 19th century with President Roosevelt. However, it was the Sherman Act passed by Congress in 1890 that really began dismantled large monopolies. The Sherman Act “was based on the constitutional power of Congress to regulate interstate commerce” (Sherman Anti-Trust Act (1890). This act helped dismantle many of the monopolies that had been formed by companies’ trusts such as Northern Securities Company, Standard Oil and the American Tobacco Company. These companies had shareholders put their shares into one trust so the company could control “jointly managed” businesses and keep their prices low. This gave little competition to the major monopolies as other smaller companies could not stay in business and have such low prices. With the help of the courts monopolies continue to be kept at bay and competition continues to be encouraged within industries today.
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.
Topic A (oligopoly) - "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.
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.
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.
In the short run, oligopolies are. able to earn abnormal profits, but in the long run as well they are. able to sustain abnormal profits due to the barriers to entry and exit. Then the s The barriers act as a strong deterrent to firms that want to come in. the industry and " eat into" the abnormal profits and then exit the market.
A monopoly is evident where a firm is the sole seller of its product and if its product does not have close substitutes, as discussed in (Gans J., King S. Mankiw A. 2003). This essay will discuss the monopoly of petroleum by The Organization Of Petroleum Exporting Countries (OPEC), particularly how it controls the price of petrol, threats to its monopoly and the social costs involved.
A Monopoly is a market structure characterised by one firm and many buyers, a lack of substitute products and barriers to entry (Pass et al. 2000). An oligopoly is a market structure characterised by few firms and many buyers, homogenous or differentiated products and also difficult market entry (Pass et al. 2000) an example of an oligopoly would be the fast food industry where there is a few firms such as McDonalds, Burger King and KFC that all compete for a greater market share.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
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.