Oligopoly Essay Example

Markets witness different form of market structure depending on the market forces and the dominance of different factors. Oligopolistic is on form of market structure which exist and the forces of demand and supply determine the equilibrium price and quantity. This paper analyzes what oligopolistic market is, the different forms of collusion and the manner in which oligopolistic form of market structure is present or seen in the retail market chain which includes Coles, Woolworths, ALDI and others.

Oligopolistic form of market structure is one where a few firm dominates the market and has a larger market share and the ratio is highly concentrated (Oligopoly, 2013). The situation could be such that there could be many small firms operating in the market but are not large or substantial to influence the entire market thereby having a limited market share. This is seen in the retail chain players where Coles and Woolworths have around 80% of the market share. This is evident from the financial data from 2004 to 2008 which shows that the combined share of both the player is more than 80% (King & Mortimer, 2013). This is continuously increasing and is thereby increasing additional pressure on other players like ALDI which is left alone.

One of the reasons which could be identified for an increase in the market share is because of collusion where two or more organizations come together and work as a single unit and don’t compete with one another (Riley, 2012). This is a situation where both the firms for their mutual benefits exploit the society and aim towards charging a higher price than normal competition would have allowed. The fact that organizations don’t compete so the strategies of each organization is well known and based on it the pricing and other mechanism is determined.

A more through check on the market control for Coles and Woolworth shows that they have a substantial share in fresh fruit market where they control around 80% of the market share but on the whole the control reduces (King & Mortimer, 2013). Still on the whole the control for Woolworth and Coles is substantial and has acted towards developing strategies which will fetch them better returns.

The Australian Competition and Consumer Act is investigating the claims of an oligopolistic structure in the retail chain market haven’t been able to find substantial claims. The suppliers aspect although reflects the presence of an oligopolistic as suppliers claim that Woolworth and Coles demands them to pay higher for the goods stocked with them apart from the negotiated terms and is treated as penalty which is not accounted for (Parker, 2013). This substantiates that Coles and Woolworths is trying to create an artificial market and is using their market share to influence suppliers to pay them more and more money. This is supported by the difference in pricing which appears from house brand and other brands showing the manner in brand are expected to pay more.

The situation is very difficult for Australian Competition and Consumer Act to substantiate but the control of major market share definitely raises concerns and shows the manner in which both Coles and Woolworth looks to influence the market. The fact that oligopolistic structure is evident to a certain degree has resulted in the consumers and the society being exploited for the benefit of the organizations who holds a major market share.

References

King, S. & Mortimer, G. 2013. Fact Check: Do Coles & Woolies Control 80% of the Market? Retrieved on August 13, 2013 from http://theconversation.com/factcheck-do-coles-and-woolies-control-80-of-the-market-15418

Oligopoly. 2013. Oligopoly. Retrieved on August 13, 2013 from http://www.economicsonline.co.uk/Business_economics/Oligopoly.html

Parker, C. 2013. ACCC’s inquiry into supermarket bullying misses the real issue of duopoly. Retrieved on August 13, 2013 from http://theconversation.com/acccs-inquiry-into-supermarket-bullying-misses-the-real-issue-of-duopoly-power-12247

Riley, W. 2012. Oligopoly – Collusion between Firms. Retrieved on August 13, 2013 from http://tutor2u.net/economics/revision-notes/a2-micro-oligopoly-collusion.html