Assignment 9 The Role of Oligopolistic Firms Business Essay

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November 23, 2020
The Role of Oligopolistic Firms
Oligopoly is one of the common market structures in the world. This is exemplified in various industries such as news media outlets, the auto industry, and commercial travel. Generally, an oligopoly is defined as a market structure where only a few large companies dominate the market and offer around the same or different products, thereby increasing the common entry barriers. Although oligopoly could be beneficial in some aspects, it is also disadvantageous for several reasons. Thus, in this article, I would like to discuss both the risks and benefits of oligopolistic firms.
Benefits of Oligopoly
There are plenty of benefits that an oligopolistic structure has towards society, such as price stability, improved research and development, and competitive market structures.
On the one hand, an oligopolistic structure could help improve the stability of prices in the market. Market prices are usually determined by a variety of factors. In highly competitive markets, prices may vary significantly across firms and across time due to the number of companies that offer various products. Although a highly competitive market allows for a much lower price range due to the number of alternatives, this also means that consumers would be exposed to the risks of choosing the incorrect commodity that he needs by basing it merely in the price CITATION Econd \l 1033 (Economics Online, n.d.). Nevertheless, an oligopolistic firm helps address this problem through price stability.
On the other hand, an oligopoly could also improve the competitiveness of the market by developing better alternatives. As stated earlier, the prices of services in an oligopolistic structure are much higher than in a highly competitive system. Additionally, oligopolistic firms have a much more diverse and robust consumer base since they limit the number...