Question

The beer manufacturing industry in the U.S. includes dozens of independent firms. Yet the American beer industry is regarded as one of the most oligopolistic industries in the country. Why is this?

Answer 1

In an oligopolistic industry, the firms are large in size and they dominate the market due to their size. It is also characterized by high barriers to entry and exit due to high fixed costs and supply chain issues. The beer manufacturing industry in the U.S. includes dozens of independent firms. However, each firm occupies a sizeable portion of US beer market, which signifies control over the market. Also, fixed costs are high in terms of large vineyards that are required for beer production, which explains the barrier to entry for new firms. So, the characteristics of oligopolistic industry are found in the beer industry. Hence, the American beer industry is regarded as one of the most oligopolistic industries in the country despite having dozens of independent firms.

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