Which of the following is the best example of an oligopoly in the united states?

There are ample examples of oligopoly. In the current scenario, the number of these players is increasing. Oligopoly is the polar opposite of a monopoly, allowing multiple competitors to coexist. So consumers have a list of companies for a particular sector. These are prevalent and that too within the wide cross-section of industries. Some of the common industry sectors where we can see it are the aviation industry, media industry, pharma industry, telecom industry, media, etc.

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Source: Oligopoly Examples (wallstreetmojo.com)

Oligopoly Example #1 – Technology Industry

The computer technology sector shows us the best example of oligopoly. If we dig under computer operating softwares, two prominent names come up: Apple and Windows. These two players have managed the majority of the market share. There is one more player in this oligopoly named Linux Open Source. But apart from these three, there are hardly any players in this sector as they command almost 100 % of the global market share. The computer can be of any brand, but the operating system will be for sure from any of those. They have achieved this stage because of two primary factors.

One is the brand image and trust they have created in the eyes of consumers, and secondly, there is the lack of players who can stand in front of these three while building trust among consumers. Moreover, their dominance in this sector gets increased as the majority of computer softwares made are compatible with these three operating systems, which in turn is making this oligopoly self-sustaining. Their innovations into their sector also keep them unique, which helps them create an ecosystem that completely sustains their growth.

The same is the case for an operating system for smartphones where the majority market share is captured by Android & iOS. These companies are coexisting without creating a threat to others.

Oligopoly Example #2 – Media Industry

Let us take the media sector in the US, where 5-6 players are capturing almost 90% of this sector. At the same time, a 10% share is being captured by the other small players who command the chunk of viewership, including the likes of Viacom, Disney, Time Warner, and NBC. They capture a significant share in terms of operating rates and usage terms. When we look at the overall prime time programming and content selection, we will observe that there is also considerable unity.

It means if they keep the same primetime on every channel, their viewership will be diversified. In that case, not a single player will be able to take the edge. So they follow through with their unity by looking out for the share of the same viewer base by mutually deciding the prime time for individual channels. By following this, even though the scalability of the TV channels will get limited to an extent across those ranges, all the players can coexist, and that too with relative gains. They are not supposed to face any cut-throat competition. As a result of this oligopoly, the relative cost will decrease for the new foray.

Oligopoly Example #3 – Automobile Industry

The automotive sector in the United States shows a unique example of oligopoly. The trinity of Ford, Chrysler, and GM has come into the limelight because of technological excellence. They have offered stiff challenges and competition to the major players worldwide. They have smartly dominated the entire space in the US local markets. They are referred to as the Big Three in the US automobile sector, which shows they hold a unique position there. They single-handled the service automobile demand in 1950-1960 and earned a huge margin. It can be seen the synchronized collusive actions taken by these three players.

It can be seen in their decisions of launching small cars, the sequence in which they raised the prices of cars which clarifies that these three players took a united and well thought of strategy. One may distinguish among the three based on prices, but based on features, all are distinct. The trend between the periods 1960 – late 1970 showed that Chrysler would announce the price rise first; then General Motors would announce the second price rise. The strategy was that General Motors would announce a price rise less than that of Chrysler. Then Chrysler will reduce its price to General Motors’ level. Further, Ford joined them in raising the price, and all three settled to the ford price. However, this oligopoly is blamed as the main cause of the downturn in the US automobile sector.

Oligopoly Example #4 – Pharma Sector

Some key players globally dominate the pharma sector. This is because they are the leaders in new drug innovation and the price maker for drugs. The top three companies we can refer to in our example are Novartis, Merck, and Pfizer. The threat of new entrants to this sector is the fairly limited reason being the whooping expenses that have to be met in developing a new drug.

Patents are being registered for the drugs in circulation, which enables easy resolution of the issue while it protects the new drug from potential competition. As a result, they can create an edge from their experiences, which will help them succeed in the future. The oligopoly here works in a symbiotic fashion.

Conclusion

The examples above of oligopoly highlight the different aspects. The economic arrangement is the primary means that will help get a level playing field. But at the same time, from the examples mentioned above, we can conclude that oligopoly is not conducive to healthy competition. The downfall of the US automobile sector is a burning example discussed in example three related to the automobile sector. Here each player aimed at pulling the other down and focused less on innovations.

The new entrant cannot easily enter because of barriers. Moreover, the high concentration reduces consumer choices, and the consumers are being treated for granted by the companies. At the same time, oligopoly helps lower the average cost of production of goods. If the extra profit marginProfit Margin is a metric that the management, financial analysts, & investors use to measure the profitability of a business relative to its sales. It is determined as the ratio of Generated Profit Amount to the Generated Revenue Amount. read more is being used in innovations, this suits companies with high R&D costs.

Recommended Articles

This has been a guide to Oligopoly Examples. Here we discuss the practical examples of oligopoly, including the technology industry, automobile industry, media industry, and pharma sector. You can learn more about financing from the following articles –

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• Examples of Monopoly
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