Index
Introduction - 1
Defining A Market - 2
The Importance Of Competition - 3
The Result Of Competition - 4
Intervening In Markets - 5
The Allocative Role - 6
The Distributive Role - 7
The Regulative Role - 8
The Regulative Role (continued) - 9
The Role Of Government - 10
The Role of Government (continued) - 11
The Stabilizing Role - 12
Vertical and Horizontal Integration Defined - 13
Defining Market Structure - 14
How A Firm Can Grow - 15
Mergers and Takeovers - 16
Vertical And Horizonal Integration (Diagram) - 17
Why markets Vary in Structure - 18
Product Differentiation - 19
Product Differentiation (continued) - 20
Free Range ''Googs''- 21
Product Differentiation (continued) - 22
Non Price Competition - 23
Non Price Competition (continued) - 24
Defining The Types Of Market Structures - 25
Perfect Competition - 26
Perfect Competition (continued) - 27
The Market For Oranges - 28
The Market For Oranges (continued) - 29
Bitter Oranges - 30
Summary: Perfect Competition - 31
Monopolistic Competition - 32
True Blue Oranges - 33
Monopolistic Competition (continued) - 34
Oligopoly - 35
Oligopoly (continued) - 36
Oligopoly (continued) - 37
Kinked Demand Curves - 38
OPEC - 39
OPEC (continued) - 40
Monopoly - 41
Microsoft - 42
Why Monopolies Are Inefficient - 43
Revision Questions On Market Forms - 44

Oligopoly - 35

An oligopolistic market is one where the market is dominated by a small number of firms (usually under ten). These firms gain the majority of total sales revenue. As in monopolistic competition, firms in an oligopolistic market sell similar goods and services which are close substitutes, and thus price sensitive.

However, the barriers to entry in an oligopolistic market are higher than in the two market forms previously discussed. Many Australian markets are dominated by a few, large firms.

The grocery market in Australia is an oligopoly. This market is dominated by Woolworths and Coles, nationally. These companies have extensive distribution systems, with stores in most urban and regional areas across Australia. To compete with these firms would require a large investment; in the billions of dollars, conservatively. The automobile and petrol markets are also oligopolies.

Economists measure the seller concentration ratio of an industry to determine whether it is an oligopoly. Seller concentration ratios are based on the percentage of sales of the four largest firms in the market, as a percentage of all sales in the market. This ratio is then compared to the total sales of the twenty largest firms in the market.

The seller concentration ratio in the grocery market is about 80%; the four largest firms (Woolworths, Coles, Franklin's, Davids) account for 80% of all grocery sales in Australia.