You are a manager of a software company, the industry that you operates subsequently became oligopolistic....
You are a manager of a software company, the industry that you operates subsequently became oligopolistic. What considerations, on the principles of managerial economics, you now have to consider as a medium-sized enterprise operating in this distinctly new market structure.
Homework Answers
The number of firms is very limited in this market structure. Examples of this market are crude oil, steel market, software market, etc. Entry could be done but it is very difficult because of very high fixed cost.
Considerations:
(1) Price can’t be increased by a firm because the other firms may not follow that price. It creates loss to the firm.
(2) Price can’t be decreased by a firm (because of earning higher profit), since the other firms will immediately follow that price. It creates no additional profit.
(3) Therefore, the firm has to follow the prevailing market price.
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