Oligopolies
Discussion
Industries that are dominated by a few large firms are known as oligopolies. Most people prefer products made by a few large firms. In our daily lives, oligopoly is pervasive. From phones, airbuses, drinks, to many other products produced by large firms. Oligopolies are, therefore, prevalent all over the world (Head & Spencer, 2017). The cooperation among these firms helps them earn more from the consumers, despite their competition within a particular market. Examples of such industries include mass media, automobiles, computer and smartphone operating systems, and airlines, among others. Here, the decision of one firm influences or is influenced by that of other firms. Non-price competition is common in oligopolies.
The amount a company spends on an input that is fixed is also fixed. Fixed costs are associated with such fixed inputs in the short run. On the other hand, variable inputs are related to variable costs. Fixed costs remain the same over a short-term, despite changes in several activity levels like sales volume. An industry or business with a high level of fixed costs demands high revenue levels to prevent the business from collapsing or operating at a loss (Head & Spencer, 2017). Fixed costs present in oligopolies are as follows; rent, which is charged after a certain period. Salaries paid to workers are also fixed costs. Another fixed cost is insurance, which is charged per the contract. Property taxes charged by the government on the basis of the cost of business assets are also fixed costs. Big firms with big profits can meet their fixed costs as compared to smaller firms, thus more cost-advantaged.
References
Head, K., & Spencer, B. J. (2017). Oligopoly in international trade: Rise, fall and resurgence. Canadian Journal of Economics/Revue canadienne d’économique, 50(5), 1414-1444.