Oligopoly
By: Cynthia Yang
Characteristics:
1) In a oligopoly, the market has a few sellers
2) In a oligopoly, the firms sells either identical or similar products
3) In a oligopoly, there are many barriers to enter or exit the market
4) In a oligopoly, the firms will act as a cartel
Delta airlines fit an oligopoly because it makes money from people who travel a lot. On the plane, the seats may be different if they were more comfortable than U.S Airways but from destination A to destination B is always the same. Since there are many barriers many are discouraged to enter the market which results in the market having a few sellers. These airlines will act as cartels when fixing prices. Delta and other airlines are price setters.
1) Delta
2) U.S Airways
3) Southwest
4) United
5) American Airlines
Advantages vs. Disadvantages
- Few sellers= More control
- Competitive prices result when consumers compare prices of different firms
- Customers can compare which airlines have the cheapest price
Disadvantages:
- Firms will not improve their business once they have a product because of little competition
- New firms have trouble entering the market because of many barriers
- The firm may set the price but at the customers disadvantage because firms might have unaffordable prices
Educational Poll
What are some disadvantages stated in the description of Delta?
A) Since many barriers many are discouraged from entering the market
B) Few sellers
C) Makes money from a lot of travelers