Oligopoly Duopoly &Monopolies In Australia â€Myassignmenthelp.Com

Question: Discuss About The Oligopoly Duopoly And Monopolies In Australia? Answer: Introduction There are many types of market structures in which businesses operate in all nations. These structures are; competitive markets, oligopolistic, monopoly and monopolistic markets (Stiglitz, 2016). The difference between these markets is the size and numbers of sellers, type of product (could either be similar of differentiated), market power, etc. Oligopoly markets are many up of few number of sellers but among the few, there are giants who controls the market (McTaggart, Findlay Parkin, 2012). Duopoly is the extreme case of an oligopoly market structure where two big firms controls nearly the whole market share. Monopoly market structure is a situation where there is only a single big supplier in the whole market (Australiancompetitionlaw.org, 2016). Depending on the number and size of the sellers, these three market structures have different market powers. Australia is known for operating in an oligopolistic market structure and thus this papers concern will cover mostly the oligopolistic competition. Perfect competition is the most effective market structure since it leads to efficient output and prices; the other market structures have market powers of which sometimes is misused and brings about inefficiency. Understanding the market structures helps the policy makers in ensuring that competitiveness is promoted so as to discourage any behavior of misusing the market power. The paper will also create an awareness to the business people that they may face legal charges if they discourage competition in the market. Economic Analysis The issue of a market being competitive is the major concern of this paper. In order to clearly see some of the negative impacts of uncompetitive nature of Australian markets, the article NBN to entrench broadband oligopoly: analysts by Letts (2016) highlights some of the industries practicing uncompetitive market behavior. Some of the industries noted to operate in an oligopoly market is the telecommunication industry, Grocery and supermarkets, the Airlines and the banking sector; these are the industries in which most of the Australians depend on. Flynn (2013) argued for the Australian aviation industry Qantas and Virgin to be a duopoly. This article also covers the presence of entrance barriers and how they challenges the governments objective of promoting competition. According to Klijn (2015), there are higher returns in operating in either an oligopoly, duopoly or monopoly market structure in comparison to the competitive markets and thus more preferred by most investors. Howev er, the Australian Competition and Consumer Commission's (ACCC) has struggled in promoting competition in the markets by controlling the market powers. Fig: Biggest companies in Australia Source: McDuling (2015) The graph show that some of the biggest companies in Australia were founded many years ago. This explains the reason for their raised level of market power. Kollmorgen (2016) noted that the supermarket industry is a duopoly and highlighted that Woolworths and Coles control 73%. This is contrary to the same notion made by Shakibaei (2012) that the duopolies controlled 80% market share. The difference is explained by the increased competition in this industry. Fig: Economies of Scale for Oligopolies and monopolies The presence of economies of scale enables the big players to slash their prices since they can produce more at a lower cost: the average costs falls as output rises. Since the entrants do not have the economies of scale, they are discouraged from operating in the market. The ACCC is succeeding in this goal as it can be noted that new investors have entered most of these market structures and are gaining some market share whereas the market share of the big businesses is declining. The ACCC has promoted the shift of businesses from one market structure to another as the number of suppliers rises. Telstra a quasi-monopoly in the telco market has shifted to an oligopoly market structures as Vocus, TPG and Optus have gained some of its initial market share. Telstra initially controlled 80% of the industrys revenue whereas the others controlled the remaining 20%; thanks to the ACCC that by 2016, this company controlled 60% increasing the control for the other firms by 20%. This has raise d the profitability of other telecommunication firms and its making an attraction to other potential investors. Letts article concluded that competition is better than operation of firms with increased market power. It noted that the shift of Telstra to an oligopoly is much better than when it operated as a quasi-monopoly. Recommendation Living standard is completely undermined by the existence of oligopoly, duopoly and monopoly market structures in Australia. Living standards could only be promoted by ensuring that there is increased competition in the market as this would make the products and services more affordable. This is achievable only by ensuring that barriers to entry that pre-existed and those created by the market players are eliminated. One barrier to entry is created by slashing of prices so as to make it less profitable for new entrants. This can be only eliminated by the government fixing the minimum price for the goods and services. This would ensure that even at the lowest price (minimum price), new entrant will make some profits. Australian is an economy whose cost of doing business is very high and this is already a self-barrier to entry. This can be eliminated by the government easing its regulations on business investments and promoting a low-cost business environment. Conclusion Ensuring that firms are competitive in nature is an important governments role. Price levels are generally influenced by the market supply and demand for goods and services. In competitive firms, the level of output is high and the price charged is generally low. This is because the players in this market have no influence on price for goods and services. On the other hand, the oligopolies, duopolies and monopolies are inefficient as the level of output is lower. These market structures have significant influence on price as they limit the level of their output to sell at higher prices. Without proper regulation by the government, most businesses could choose to operate in these markets to maximize their wealth. They are able to maintain their market power since there exist barriers to entry and the fact that they also create others of their own. References Australiancompetitionlaw.org. (2016). Competition Law Economics | Overview. Australiancompetitionlaw.org. Retrieved 24 August 2017, from https://www.australiancompetitionlaw.org/law/economics/index.html. Flynn, D. (2013). Borghetti defends the Qantas-Virgin duopoly. Australian Business Traveller. Retrieved 24 August 2017, from https://www.ausbt.com.au/borghetti-defends-the-qantas-virgin-duopoly. Klijn, W. (2015). Study finds Australian oligopoly premium. Theinstoreport.com.au. Retrieved 24 August 2017, from https://www.theinstoreport.com.au/articles/study-finds-australian-oligopoly-premium. Kollmorgen, A. (2016). Market monopolies in Australia: Is Australian suffering from a market concentration crisis? Choice. Retrieved 24 August 2017, from https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/market-concentration Letts, 2. (2016). NBN likely to entrench broadband oligopoly: analysts. ABC News. Retrieved 24 August 2017, from https://www.abc.net.au/news/2016-04-08/nbn-to-entrench-broadband-oligopoly/7310228. McDuling, J. (2015). Corporate Australia's real problem: ancient companies. The Sydney Morning Herald. Retrieved 24 August 2017, from https://www.smh.com.au/business/the-economy/corporate-australias-real-problem-ancient-companies-20151125-gl7wu2.html. McTaggart, D., Findlay, C. Parkin, M. (2012). Macroeconomics. AU. Pearson Higher Education. Shakibaei, B. (2012). Duopolies: Woolworths and Coles. Wordpress. Retrieved 24 August 2017, from https://markets6605.wordpress.com/2012/06/13/duopolies-woolworths-and-coles/. Stiglitz, J. (2016). The new era of monopoly is here. The Guardian. Retrieved 24 August 2017, from https://www.theguardian.com/business/2016/may/13/-new-era-monopoly-joseph-stiglitz.