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“Explain how a firm operating in an oligopolistic market might attempt to increase its market share.
“Evaluate the view that producers, and not consumers, are the main beneficiaries of oligopolistic market structures.”

Demands of the question
1. paper 1
2. 20 minutes
3. explain the ways it is possible to increase market share
4. show the pro’s and con’s as a producer, and a consumer, and explain why producers benefit “more” than consumers.
Key terms:

Oligopoly: A market structure where there is a small number of large firms that dominate the market. For example 90% of petrol sold in a country is accounted for by four large chains of petrol stations.

Market: it is where buyers (consumer) and sellers (producers) come together to establish an equilibrium price and quantity for a good or service. It does not need to be an actual place.

Firm: a term referring to company that produces a certain product

Powerpoint

Diagram:

Explain:

Part 1:
– A firm will either heavily depend on advertisements in order to gain the greater demand for their product.
– A firm can have a short-run price drop (lower their prices) to gain favor of the demand.
– A firm can create more innovative products because there is less competition to compete with.

Part 2:
– Producers cons: Relies heavy on advertising/branding, can suffer from diseconomies of scale.
– Producer pros: Innovation in products due to low competition, benefits of economies of scale, super abnormal profit possibilities, the product type generally has the same price.
– Consumer cons: Limited choice of products, the price does not range therefore could be overpriced without knowledge, products are most likely similar therefore not “different”, small fear of new competitive firms because of high barriers to entry.
– Consumer pros: No worry of failing products, the price is likely to not change, familiarity with products.
-Overall, both the consumers and producers benefit, however producers benefit more because once a “player” in the “game” of oligopolistic markets, the firm can simply comply to the prices already set and gain profit because the price set is obviously higher than that of the original production prices. Henceforth, the producers gain abnormal profit.