Question

my college have parking problem

Over the time assume that the college decides to divide the Parking of the college in two parts and give it to two different companies to manage. One company to manage the parking in front of the college, other company to manage the parking in the Backside of the college. So now the company has to face a competition in the market. Assume that the company you are advising is given the parking in front of the college to manage

question

What is the kind of market they are operating in now and how is it different from the market they were operating in before the competition came in? Answer needs to in related to the business they are operating in(parking company)

Answer 1

Currently they are operating in an oligopoly Market as there are only 2 companies competing with each other.

An oligopoly is an industry which is dominated by a few firms. In this market, there are a few firms which sell homogenous products or services ( here its the parking facility which is a form of service)

Also, as there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it.

Characteristics of Oligopoly Market-

1.Few firms

Under Oligopoly, there are a few firms . Also, there is severe competition since each firm produces similar products or services.

2.Barriers to Entry

Under Oligopoly, a firm can earn super-normal profits in the long run as there are barriers to entry like patents, licenses.

3.Interdependence

Under Oligopoly, since a few firms hold a significant share in the total output of the industry, each firm is affected by the price and output decisions of rival firms. Therefore, there is a lot of interdependence among firms in an oligopoly. Therefore a firm takes into account the action and reaction of its competing firms while determining its price.

Earlier they were operating in Monopoly as there was no other firm giving the same parking facility outside the college.

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity/service.

Some characteristics of monopoly are-

1.Single Seller of the Product-

In a monopoly, market usually, there is a single firm which produces and/or supplies a particular product/ commodity. It is fair to say that such a firm constitutes the entire industry.

2. Entry Restrictions-

Another feature of a monopoly Market is restrictions on entry. These restrictions can be of any form like economical, legal, institutional etc.

3. No Close Substitutes-

Usually, a monopolist sells a product/service which does not have any close substitutes. Therefore, the cross elasticity of demand for such a product is either zero or very small.