Why are so many familiar industries oligopolies?

Answer 1

It depends on the type of monopoly.

The local power company is a monopoly. It is a monopoly because the government only allows one company of its type. Otherwise, rival companies would have to use their own poles and equipment, and it would be confusing since you would not know who to call when the lines are down. Likewise, there is only one public mail service, though there are private couriers and package services. Government offices are monopolies by their nature.

Sometimes a monopoly exists because the product is something rarely used and nobody else wants to compete or provide alternatives.

Sometimes monopolies occur because rivals go out of business. Others may run them out of business, or they may be subject to natural disasters and poor management.

Some monopolies are deliberately designed through practices such as "lock-in" and planned obsolescence of products. For instance, lets suppose you produce an operating system. You can plan for it to have a limited life. But you create brand loyalty and introduce incompatibilities with competitors' products. So the users, if they want to keep the software they already bought, they must stick with your operating system. You could even require manufacturers to create hardware what will only work with your software. So if the user doesn't want to replace the device, they must stay with your operating system. You could even use legal barriers such as patent suits to keep competition out of your market.

There are also anti-competitive practices that are used to help create monopolies. Here are some common ones:

Absorption of competitors or competing technologies -That is when a large company absorbs smaller companies which may become competitors or which have a new technology that poses a threat.

Dumping - That means flooding the market with low priced items. Sure, that hurts all the businesses that sell such products, even your own, but if you have more wealth than the competitors, your business can recover, while theirs likely will not. Once your competitors are gone, then you are free to charge whatever you want.

Excessive government regulations - That insures that only wealthy businesses of whatever type can stay in business. Often, predominant companies in an industry are the ones lobbying for the regulations.

Exclusive dealing - If the suppliers for parts will only supply to one company, then it would be difficult to make competing products.

Government subsidies - A company that is not profitable can have an unfair advantage over companies that need to make a profit if someone else is paying for the company to stay in business.

Intellectual properties misuse - This includes abuse of patent and copyright laws.

Refusal to deal - If you want to run someone out of business, you could get multiple large companies to refuse to do business with them.

Territory division - Two or more companies agree among themselves who can sell what items.

Tying - That is where unrelated products must be purchased together. That is why a software giant ran into problems with bundling a web browser for their OS. That way, other companies could not profit as much from selling Web Browsers, since they rendered 3rd party browsers unnecessary.

Answer 2

It exists because the market is strong, and the leading few businesses have enough capital to make the product needed. This means that there are high barriers of entry because things like oil, is only really known by BP and Rio Tinto. They are worth millions, so for a company starting out with barely a million to try and take on these businesses that have billion dollar operations regularly is difficult.

hope this answers it

Answer 3

An oligopoly market exists when barriers to entry result in a few mutually dependent companies controlling a substantial portion of a market.

Answer 4

A small number of producers command nearly the entire market for a certain good or service.