Question

1. pick a product that you think is an Oligopoly. 1 points
2. Elaborate on the characteristics that define your particular market, and use them to defend that you have actually chosen an Oligopolistic market. (1 point each characteristics). There are 3: number of firms, type of product, and entry/exit. :)
3. Look up the market share for your firm- and the market share of one more firm in this market. Does the market share help you classsificy your product better? ( 2 points)
4. Evaluate the role of advertising or strategic behavior in this market- can you come up with an example? 2 point

Answer 1

SOLUTION

1) Oligopoly exists in the telecommunication market.

2) No. of Firms: An Oligopoly characterise few firms and each firm has a large share of the market. In the US the number of firms in the telecommunication market is low and 4 top firms dominate the market with over 90% market share.

Type of Product: An oligopoly may have homogenous products or slightly differentiated products. In the telecommunication market the products are slightly differentiable on the basis of services, network strength, speed, plans, etc.

Entry and Exit: Barriers to entry and exits are usually high in Oligopoly. In telecommunication industry there are various legal requirements to enter and also the capital investment is huge which also serves as a barrier to entry and exit.

3) Verizon is the top firm in the US telecommunication market with around 35% market share followed by AT&T with a 34% market share. Yes, the market share helps to classify our product as ann oligopoly better as together 2 firms own 69% of the market share and also top 4 firms own over 90% market share. This implies that our market has few firms and 4 top out of these firms hold the major market share.

4) With the help of advertising or strategic behaviour, firms try to differentiate their product and ensure that customers remain brand loyal. An advertisement by Verizon stated that you only pay for what you need if you opt our services, you can mix and match plans as per your requirement and at last, stated that the network more people rely on offers more. With the help of advertisement, they highlighted that they hold the major market share and there is a reason more people rely on us as we offer more. They also conveyed that you can alter the plans as per your need. So, this advertisement differentiated their product in many ways in relation to that of its competitors'.