Writing Assignment #2 Essay Example | Topics and Well Written Essays - 500 words - 4

Writing Assignment #2 - Essay Example Products in oligopolistic market structures will usually have very few or no substitutes as in the case of oil. The automobile industry in the world also evidences oligopolistic tendencies with a few large car manufactures selling similar auto models across the world. In most cases, players in such industries are torn between competing separately to win the market and coming together to create a monopolistic situation. Normally, the latter case never works as most companies rebrand constantly to differentiate themselves from their competitors. This is clearly seen in the automobile industry where different auto makers are customizing their brands to suite specific categories of people in the market. In a duopoly market structure, where the market players are limited to two, the common situation is normally cooperation between them so as to limit output to the monopoly style (Perloff 78). In such a case, profit is maximized as the price becomes much greater than the marginal cost. A case in point lies in the operation of Coca-Cola and Pepsi cola which operate in a duopoly situation. Most duopolies are created out of collusion between two or more players who agree to jointly set the price and manage output. Production in that is usually more than in a monopolist but less than in the in the completive market. In the same vein, some duopolies operate as cartels where strict cooperation is the order of the day. Price determination in oligopolistic market environments is always the prerogative of the market players. This arises since these players are normally big enough to influence prices in the market unlike in competitive market environments. In any case, prices in such markets are not determined by the interaction of supply and demand but are a function of the cooperation between the competing firms. Such a pricing strategy is known to create myriad inefficiencies in the market as usually evidenced in the oil industry where the need to rake in more profits