The advantages of going first or going second are respectively called 1st and 2nd-mover advantage.
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For example, if a petrol retailer like Texaco wishes to increase its market share by reducing price, it must take into account the possibility that close rivals, such as Shell and BP, may reduce their price in retaliation.Rivals have no need to follow suit because it is to their competitive advantage to keep their prices as they are.Will rivals be able to copy the strategy?Cost-plus pricing is also common in oligopoly markets because it is likely that the few firms that dominate may often share similar costs, as in the case of petrol retailers.The insperity invitational 2017 prize money super-normal profits they generate may be used to innovate, in which case the consumer may gain.When there is a high concentration ratio in an industry, economists tend to identify the industry as an oligopoly.Each strategy can be evaluated in terms of: How successful is it likely to be?Collusive oligopolies Another key feature of oligopolistic markets is that firms may attempt to collude, rather than compete.Pricing strategies of oligopolies Oligopolies may pursue the following pricing strategies: Oligopolists may use predatory pricing to force rivals out of the market.
Tacit Tacit collusion arises when firms act together, called acting in concert, but where there is no formal or even informal agreement.
It has been suggested that cost-plus pricing is common because a precise calculation of marginal cost and marginal revenue is difficult for many oligopolists.
In other words, they need to plan, and work out a range of possible options based on how they think rivals might react.
If firms do collude, and their behaviour can be proven to result in reduced competition, they are likely to be subject to regulation.For example, the manufacture, distribution and publication of music products in the UK, as in the EU and USA, is highly concentrated, with a 3-firm concentration ratio of around 70, and is usually identified as an oligopoly.More Get the Economics Online app Updates Resources For students). Many of these costs are sunk costs, which are costs that cannot be recovered when a firm leaves a market, and include marketing and advertising costs and other fixed costs.Business Insider has affiliate partnerships, so we get a share of the revenue from your purchase.At profit maximising equilibrium, P, prce is above MC, and output, Q, is less than the productively efficient output, Q1, at point.The oecd presents its final package for reform of international tax rules.Brexit latest Dominic Raab appointed as Brexit negotiator.Will the firms get a 1st - mover advantage?Firms can be prevented from entering a market because of deliberate barriers to entry.Oligopolists may collude with rivals and raise price together, but this may attract new entrants.Sales promotion, such as buy-one-get-one-free (bogof is associated with the large supermarkets, which is a highly oligopolistic market, dominated by three or four large chains.
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This leads to little or no gain, but can lead to falling revenues and profits.
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