Answer to Question #310202 in Microeconomics for joseph

Question

Select one market to focus on. Clearly indicate the market and describe the market structure. For example, is it perfectly competitive? Is an oligopoly market? And so on.

• You are free to select any market of your choosing. For example, the global market for copper, the market for housing in London, the market for cheese in the United States, etc… You will have more to talk about for some markets than for others, and you must ensure you can find the appropriate price data.

Answer 1

Answer

Let's talk about oligopoly market.

An oligopoly market is one that consists of a small number of large companies or sellers that offer identical or differentiated products.

An example of an oligopoly market is the United States airline industry in which the four major domestic airlines; American Airlines, Delta Airlines, Southwest Airlines and United Airlines account for $65\%$ of all domestic passengers.

Characteristics of these oligopolies are:

1. They are price setters in that the major carriers decide the air ticket prices
2. There exist high barriers to entry due to the high cost of establishing an airline and the length process of certification
3. There are only four major airlines which is a small number and the action of each firm influences those of the others
4. These airlines always strive to maximize their profits and their returns to their investors
5. These airlines offer slightly differentiated products