The disadvantages of oligopolies

Oligopolies can be criticised on a number of obvious grounds, including:

1. High concentration reduces consumer choice.

2. Cartel-like behaviour reduces competition and can lead to higher prices and reduced output.

3. Firms can be prevented from entering a market because of deliberate barriers to entry.

4. There is a potential loss of economic welfare.

5. Oligopolists may be allocatively and productively inefficient.

Oligopolies tend to be both allocatively and productively inefficient. At profit maximising equilibrium, P, prce is above MC, and output, Q, is less than the productively efficient output, Q1, at point A.

Дата добавления: 2015-08-03