Oligopolistic Offer: What it is and examples

  • Nov 29, 2023
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The oligopolistic offer is an offer generated by a group of companies that dominate the market of a certain industry, influencing the market in its favor and creating a competitive advantage that prevents the emergence of others competitors; Basically it is an intermediate point between perfect competition and a monopoly.

Oligopolistic supply is a situation of imperfect competition where only a small group of companies or suppliers control a large part of a certain market.


oligopolistic supply

Well, these companies create barriers that prevent the emergence of new competitors, and if they do emerge, the practices of aggressive or unfair competition quickly displace them, preventing them from growing and positioning themselves in the market.

Oligopolistic offers, although they generate imperfect competition, are not as extreme as monopolistic ones, in which a single company controls the market; This is a midpoint between perfect competition and a monopoly, where free competition itself originates this market, and which generates that only a group of suppliers control production, distribution and even the price.

In the current economy of most countries It is common for oligopolistic market structures to be created, given by the same market dynamics.; To better understand what these types of offers are about in the economy, in this post we will explain What is an oligopolistic offer and some examples for your greater understanding.

In this article you will find:

What is an Oligopolistic Offer?

Oligopolistic supply is a situation in the market where the supply of a good or service is dominated by a small group of offering companies, who have the power to intervene in the quantity produced and sold in the market.

Its cause, although it is not the only one, they are mainly due to an economy of scale, which allows monopolists to reduce their costs as they increase their production, and in turn the possibility of competing by offering at a cheaper price.

These companies create an oligopolistic offer whose decisions depend on the behavior of the others, basically what is known as game theory, where for an economic agent to be successful he must take into account the behavior of the other participating agents, creating an interdependence mutual.

Professor Fernando Araya, in his research The problem of oligopoly and coordinated effects (2013), states that “In every oligopoly there is what the literature calls 'oligopolistic interdependence', that is, the companies in a market like this make their decisions influenced by their mutual interdependence. Being few, any change in the prices or products of one actor will have a direct influence on the results of its rivals, which will cause them to adjust their pricing and other strategies.” (p. 272).

Basically, in order to make their oligopolistic offers, these companies must consider both the demand for their products in the market and the way in which their competition can react to their commercial strategies, which does not mean that the market offer is agreed upon between them, but rather is the product of individual decisions influenced each other.

7 Examples of oligopolistic supply

  1. The companies Coca-Cola and Pesi-Cola, These are a clear example of oligopolistic companies whose individual supply decisions are influenced by the behavior of the other in the market, and although there are other suppliers of carbonated drinks, these companies lead almost 100 % From the market.
  2. American fast food companies McDonald's and Burger King, Although there are more fast food establishments in the market, the commercial strategies of these two companies They allow them to dominate the market, creating a competitive advantage that favors them and prevents the growth of others. competitors.
  3. Multinational financial services Mastercard Incorporated and Visa; whose credit card service makes them oligopolistic providers, leading the market internationally, although there are more bidders, the large number of applicants is channeled through these two.
  4. The companies of mobile telephony in each country, whose market has few suppliers to satisfy the demand, whose high investment, system and technology highly specialized, become strong entry barriers for the emergence of new competitors.
  5. The automobile manufacturing companies, whose industry is dominated by a few companies compared to a large number of plaintiffs, such as Toyota, General Motors, Nissan, Ford, Volkswagen, Hyundai, among others, that even though there are a great variety of producers in the automotive industry, the largest share of market participation is represented by these companies.
  6. The airport companies, whose market is dominated by a small group of companies, who have control over the supply of domestic and foreign flights, as well as the market price.
  7. Companies that produce and market natural gas, whose industry is dominated by a small group of companies that vary Depending on the country, the same happens with companies that export, extract, refine and market oil and its derivatives.

“It should be noted that the existence of a group of oligopolistic bidding companies does not imply that they are the only bidders in a market, but if they have a large participation rate that exceeds 80%, therefore, they behave in a similar way to companies monopolistic.”

Bibliographic reference:

  • Araya Jasma, Fernando The problem of oligopoly and coordinated effects. Supreme Court, January 2, 2013, role 3993-2012. Chilean Journal of Private Law[online]. 2013, (20), 271-284 [Consultation date October 28, 2022]. ISSN: 0718-0233. Available in: http://www.redalyc.org/articulo.oa? id=370833939015 tps://www.redalyc.org/articulo.oa? id=370833939015.
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