Essay Plans

Does the consumer gain from oligopoly?

SYNOPSIS:

POINTS:

Define and draw oligopoly.
Remember there are several kinds of oligopoly thus diagrams must not be limited to the kinked demand one alone.
Show how price stability is derived from the kinked demand curve. This reduces uncertainty for consumers and producers - enabling them to plan ahead.
If prices do not change, decisions may be made long term. The costs incurred in gathering information on which to base the decision are reduced.
Competition under oligopoly TENDS to be non-price thus the consumer may benefit from after sales service, promotional prizes, free gifts etc.
BUT the costs of non-price activities will have been built into the price structure.
If prices are stable, then economies of scale as production levels will be planned ahead - these may not, of course, be automatically passed on to the consumer.
Discussion on collusive and non-collusive. Especially price wars and how collusive oligopolies may restrict supply for political as well as economic reasons (OPEC).
Support with collusive oligopoly diagrams.