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51-Oligopoly contestable markets | Oligopoly, Duopoly definition and features| Imperfect competition - YouTube
Channel: Easy Learning Economics
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hi welcome to easy learning economics i am doctor聽
carl the raja phd in economics today our topic is聽聽
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oligopoly contestable market as we know that the聽
oligopoly has a different forms contestable market聽聽
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our collusion market are the price leadership or聽
tested column are the cartel or ring arrangement聽聽
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so here we are going to discuss only the聽
oligopoly contestable market in which we discuss聽聽
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that what is the oligopoly what are the features聽
of oligopoly what is deopoli what are the聽聽
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advantages of oligopoly what are the disadvantages聽
of oligopoly and what is contestable markets聽聽
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contestable market conclusion so these are the聽
lecture contents for today lecture so here i would聽聽
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like to suggest my two videos that are beneficial聽
for you if you go through the monopoly price in聽聽
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output determination in the short run and long聽
run period my video number 48 equilibrium of under聽聽
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monopolistic competition in short-run and long-run聽
period these two videos monopoly and monopolistic聽聽
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competition are also a form of imperfect market聽
and they also relate with the oligopoly that's聽聽
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why you must go through these videos exam notes on聽
economic related topics you can visit my website聽聽
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that easylearningeconomicsblogspot.com so links聽
are given in description box and you will find the聽聽
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exam note from exam point of view here we start聽
that what is the definition of oligopoly oligopoly聽聽
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is a form of imperfect market in which number聽
of firms are more than two but less than twenty聽聽
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selling substitute goods and are interdependent on聽
each other the oligopoly form of market is defined聽聽
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by the behavior of firm in the market the聽
oligopoly is said to exist when top 5 firms get聽聽
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60 percent of total market share it means聽
few firms says high concentration ratio聽聽
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airline market car makers mobile companies聽
oil and gold producers potency profession聽聽
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dominated by big four firms are examples of聽
oligopoly market now we are talking about聽聽
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the features of oligopoly so what are the聽
characteristics or features of oligopoly聽聽
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that few large firms with high market share or聽
dominance in the market each firm deals in brown聽聽
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product form of oligopoly like competitive price聽
leadership or tested collin or cartel arrangement聽聽
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is recognized through the behavior of firm firms聽
may cooperate with each other and agree on mutual聽聽
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price and output decision or they might divide聽
the market among themselves under collusive聽聽
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arrangements high barriers to entry and exist from聽
market do exist cross velocity of demand is so聽聽
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high so each firm price policy affects other and聽
every seller is aware about the action of others聽聽
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demand curve for firms product might have聽
different behavior with changes in price in聽聽
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order to increase the volume of sale by attracting聽
the consumers oligopolies do engage in advertising聽聽
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and other self-promotional activities聽
consumers don't have perfect knowledge goods聽聽
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are kilo substitutes goods may be homogeneous or聽
heterogeneous product like petrol steel cement聽聽
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zinc copper are homogeneous while cars cigarettes聽
electronic equipments are different product聽聽
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so oligopolies charge high price than competitive聽
market competing firms merge with other firms in聽聽
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order to have more control over supply industry in聽
which there are only two dominant form is called聽聽
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diopoli advantages of oligopoly oligopoly聽
may agree on one price oligopolist may earn聽聽
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economic profit in the long run period the聽
oligopolist earned more than standard profit聽聽
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stability of price is observed under collusive聽
arrangement customers can easily compare the price聽聽
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so now we are going to discuss what are the聽
disadvantages of oligopoly as for a disadvantages聽聽
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of oligopoly are concerned that the price is聽
determined under mutual quality agreement reduces聽聽
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the consumer surplus and provide disadvantage to聽
consumer as we know that the consumer surplus is聽聽
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the difference between the market price and demand聽
price market price is the price at which the聽聽
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commodity is sold in market whereas the demand聽
price is the price which a consumer is willing聽聽
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to pay so the price determined under mutual聽
quality agreement reduces the consumer surplus聽聽
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firms make good profit and could fail to announce聽
the incentives for product innovation price war聽聽
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is possible under competitive situation聽
of oligopoly that is contestable markets聽聽
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the concept of contestable market was given by聽
william j baumel in his theory in the year 1982聽聽
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he stated that the firm under competitive聽
condition charges that price which is聽聽
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settled through the demand and supply forces and聽
yields competitive equilibrium due to continuous聽聽
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threat of new entrant under contestable form聽
of market oligopoly firm behavior is much like聽聽
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monopoly and oligopolies charges high price and聽
maximize profit where minor revenue is equal to聽聽
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marginal cost few rival firms compete with each聽
other when new firms can enter into market while聽聽
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facing little barriers the continuous entrance聽
of new firms causes the firms to focus on sale聽聽
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volume rather than profit in these situations the聽
firm can enter and leave freely with low sun cost聽聽
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there is continuous rate that new companies can聽
enter into the market and compete with existing聽聽
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firms economic profit of firm is converted聽
into normal profit due to the fear about聽聽
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entry of new firms here you can see a growth聽
the output is shown on x-axis whereas the price聽聽
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is shown on y-axis the super normal profit firm聽
is earning if the firm charges the price pe one聽聽
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that would encourage the new customers to聽
enter into a market for an economic profit聽聽
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and if the firm decreases the price and charges聽
the p2 that the new firm will not enter new market聽聽
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it is contestable market that rate of entry keeps聽
price at p2 if the existing firm charges the price聽聽
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p1 new firm would be encouraged to enter into the聽
market and could earn economic profit in order聽聽
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to discourage the new entrant the existing firm聽
charges price p2 rather than p1 and produces q2聽聽
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output rather than q1 at this price no new firm is聽
willing to enter into the market as the firm earns聽聽
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normal profit so what is the conclusion about the聽
contestable market form of oligopoly so we may聽聽
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conclude that the firm in the contestable market聽
may make are close to our only normal profit聽聽
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inefficient firm cannot survive in the market聽
as they can't keep price low enough to prevent聽聽
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entry into the market if the new firms entering聽
into market with high cost then firm will fail聽聽
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and they have to quit from the market it is the聽
only threat of new firm that keeps the contestable聽聽
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market competitive so it is all about the聽
oligopoly deopoli and contestable form oligopoly聽聽
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in the first part we discuss the contestable聽
market or the contestable from hugo poli while聽聽
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in the second part we discuss the collusive聽
or tested colon whereas in the third part of聽聽
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oligopoly we shall discuss the cartel arrangement聽
so if you like this video please subscribe my聽聽
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channel and let me know in the comment box if聽
you have any feedback thanks for watching
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