Oligopoly

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The oligopoly ( ancient Greek ὀλίγοι oligoi , “few” and ancient Greek πωλεῖν pōlein , “sell”) is a market form in the economy that is characterized by few market participants .

General

Market participants in any market ( goods market , financial market ) are suppliers and buyers . The types of market can also be differentiated according to how many suppliers or buyers there are. Then there is:

Enquirer
lots few a
providers lots Polypol Oligopsony Monopsony
few Oligopoly bilateral oligopoly limited monopsony
a monopoly limited monopoly bilateral monopoly

An oligopsony is exactly the opposite case, in which few buyers oppose many suppliers ( demand oligopoly ). An oligopoly with just two providers is duopoly or duopoly , while a market where few providers also few customers face when bilateral oligopoly (also two-sided oligopoly is called).

Types of oligopolies

Homogeneous oligopoly
From the point of view of the customer, the goods or services offered are perfect substitutes ; consequently, there are no preferences for goods from different providers.
Heterogeneous or inhomogeneous oligopoly
The goods or services offered are only substitutes (differentiated products) to a limited extent.

A special characteristic of an oligopoly is the reaction bond between the price or volume setting of the various providers. This is not the case with an atomistic market structure ( Polypol ). Because there are only a few providers, everyone has a certain degree of market power and can influence market developments through their price or volume decisions. As a result, the demand for a supplier's good depends on how his competitors behave, ie there is a strategic interdependence between the suppliers. This interdependence is based on the fact that an oligopoly already exists when one of the competitors believes that the outcome of a decision made by it is significantly dependent on the decisions of one or more other competitors. In the oligopoly, the providers are aware that their decisions affect those of the other sellers, but the buyers take the market conditions for granted. An oligopolist is faced with a complex decision problem, as the quality of his decision depends largely on how well he can assess his influence on the decisions of others and how well he can anticipate this for himself. Competition is often particularly intense in oligopolistic markets . If a provider lowers the market price , the competitors will quickly adjust their prices accordingly ( price adjusters ) so as not to lose customers. The German food retail sector is a striking example of this .

Against the background of this market behavior , various reactions from market participants are conceivable:

Price leadership
One oligopolist is recognized by the others as the price leader . All market participants only change their prices when the price leader has changed the price. In the static case, this behavior leads to a so-called Stackelberg equilibrium.
imitation
While most price theoretical models assume a mathematical maximization decision, experiments show that imitation , i.e. H. imitating a competitor is a common form of behavior in oligopoly. If the price leader is imitated, the monopoly price can also be achieved in a duopoly.
Coordinated behavior and cartel formation
In tight oligopolies, price and quantity agreements can be easily organized. This behavior is particularly attractive for providers when other forms of competition (quality, service) are eliminated, which is especially the case with homogeneous oligopolies. Examples: sugar, cement and electricity industries.
Ruinous competition
If a company can only survive when it reaches a certain size, there is a tendency to force competitors out of the market through particularly aggressive price behavior, to which others react with further price cuts (see borderline providers ).
Price rigidity
If there are several equally strong or weak competitors, nobody dares to change their behavior because they fear that the competition will thwart their strategy.
competition
Intense competition serving technical progress and the customer is particularly prevalent in large, heterogeneous oligopolies.

Representation in theory

In theory, oligopolies are often analyzed using the tools of game theory . In such a game, given complete information, each provider can anticipate the optimal reaction of the competitors. A market equilibrium ( Nash equilibrium ) exists when no supplier has an incentive to change his quantity or his price (which would trigger corresponding reactions from competitors).

Oligopoly models

Cournot oligopoly
Market in which the participants decide in advance simultaneously about the quantities offered ;
Stackelberg competition
Market on which the participants decide in advance one after the other about the quantities offered ;
Bertrand competition
Market in which the participants simultaneously decide on the offer prices in advance ;
Price leadership
Market in which the participants decide on the offer prices in advance one after the other ;
imitation
Market in which the oligopolists do not maximize their own (Cournot) or joint (collusion) profit, but imitate the actions of a competitor (provided that the latter has a higher profit);
Kreps-Scheinkman model
Market in which the participants first decide simultaneously on the development of capacities and then simultaneously on the offer prices;
Hotelling model
Market in which the participants decide in advance about their positioning (spatial or through product variants)
Sweezy model
Market in which the price as a competitive option for the participants does not apply, as it remains more or less rigid and only factors such as advertising and services are decisive;
Three-D model
Stringer and Rudnik describe the oligopoly from three dimensions.

Legal consequences

Direct price fixing is prohibited under competition law because it can lead to an effect that negatively affects overall economic prosperity . Social surplus (loss of welfare) is reduced by the fact that the producers take advantage of the consumers. But mergers of companies can also be prohibited by the cartel office if they lead to a harmful oligopoly. A harmful oligopoly exists if either a collusion of the oligopolists threatens ( English coordinated effects ) or if the imitation of the oligopolists leads to an oligopoly peace.

An oligopoly can be obscured by the variety of “independent brands”. Among other things, the trade in CDs and other sound carriers is an oligopoly of a few providers who have a market share of almost 72% (2004). Due to the heterogeneity of the products and the low price elasticity of the demand, the market was in the past with a very strong price and organizational structure.

Examples

  • There is an oligopoly on the German electricity market . The electricity market is essentially divided between the four large groups E.ON , RWE , EnBW and Vattenfall , which together control 80% of the generation market. The market leader E.ON alone controls 34%. (See also The Big Four (German EVU) )
  • In escalators construction there is an oligopoly. Today there are only five escalator manufacturers on the German escalator market: Geyssel Fahrtreppenservice, KONE , Otis Elevator Company , Schindler Aufzüge and Thyssenkrupp Elevator. The elevator and escalator cartel was uncovered in 2004. At least in Germany and the Benelux countries, the cartel worked. The investigators were targeting 17 subsidiaries of the world's leading quartet of elevator and escalator groups: ThyssenKrupp Elevator from Germany, Otis, which belongs to the US company United Technologies, Schindler from Switzerland, Kone from Finland and also Mitsubishi Elevator Europe, the only participated in the Dutch cartel.
  • Another example is the mobile market: There are three public operators, namely in Germany , T-Mobile , Vodafone and Telefónica Germany (with the brands E-Plus and O 2 ), faced by millions of mobile users. However, the services of the network operators are also sold by many other telecommunications companies as resellers under their names ( cell phone discounters ).
  • The European oil industry is dominated by the " Big Five " BP / Aral , Esso (Exxon) , Jet ( ConocoPhillips ), Shell and Total , both in terms of the production and distribution of fuels. In Germany, this oligopoly is accused of having illegally impeded competition by selling fuel at excessive prices to free petrol stations.
  • In addition, one can observe an oligopoly with game consoles, currently only Nintendo , Sony and Microsoft hold a relevant market position for such products. With its quasi- monopoly on PC operating systems, Microsoft also has a dominant position in the video game market for PC games.
  • The South Korean film market is described as an oligopoly. Few vertically integrated companies dominate the film market. The four companies CJ ENM , Lotte Cultureworks , Showbox and Next Entertainment World divide the film distribution among themselves, while CJ CGV , the cinema chain Lotte Cinema and Megabox dominate the cinema market. CJ and Lotte are among the largest South Korean conglomerates . CJ ENM and CJ CGV are subsidiaries of the same group. Lotte Cultureworks operates the distribution label Lotte Entertainment and the cinema chain Lotte Cinema. These companies cover the entire value chain of the film industry from production and distribution to the display of the works in cinemas . The production company Showbox and the cinema chain Megabox both go back to the Orion group . Next Entertainment World entered film production as an independent company, but is heading towards increasing integration through the establishment of the multiplex chain Cine Q.

See also

literature

Web links / literature

Individual evidence

  1. ^ Heinrich von Stackelberg , Market Form and Equilibrium , 1934, p. 195
  2. ↑ Uta Neumann, Das Marktphasenschema , 1997, p. 38
  3. ^ Arthur Woll, Wirtschaftslexikon , 9th edition, R.Oldenbourg Verlag / Munich, 2000, p. 564.
  4. ^ Hugh Gravelle / Ray Rees, Microeconomics , Pearson Education / London, 2nd ed., 1992, p. 298.
  5. ↑ Joseé Apesteguia / Steffen Huck / Jörg Oechssler, Imitation-Theory and Experimental Evidence , 2006 (PDF; 240 kB), accessed March 14, 2013.
  6. ↑ Deceptive packaging competition: The variety of shopping bags is deceptive - many brands belong to a few groups . In: Die Zeit from April 24, 2003 (online offer), accessed on February 18, 2010.
  7. ↑ Cartel Office investigates oil companies ( memento of September 18, 2012 in the web archive archive.today ), accessed April 5, 2012.
  8. ^ Dal Yong Jin: Transnational Korean Cinema. Cultural Politics, Film Genres, and Digital Technologies . Rutgers University Press, New Brunswick 2020, ISBN 978-1-978807-88-4 , pp. 53-66 .