Oligopoly

Structural Methodology The structural methodology relies on the principles of demand-supply and other economic indicators equivalent terms, cost analysis, capacity utilisation, number of cockeyeds, firm size of it and concentration of firms in an intentness. Analysing the data for all these parameters provide empirical evidence indicating if firms collude or not. The various parameters are discussed further below. Number of Firms: Number of firms in an industry is inversely related to the probability of cartel in that industry (Grout and Sonderegger, 2005), as difficulty in monitoring individual firm doings increases with number of firms. Also, greater numbers of firms imply each firm getting lesser share of the pie of the profits to be increase by joining the cartel. Finally, large numbers of firms imply that firms with cost-asymmetries faeces coexist which contradict cartel sustainability. Entry Barriers: Cartel member perform meekness barriers so as to hinder the entrance of the newly private firms in the market place. These entry barriers include like increase capital investment on technology, R&D innovation to forgather competitive edge. Cartel members often indulge in price wars to cut into the profitability of the new participating firms.

In our empirical fill of the Indian cement industry that follows, data analysis has been through to find the instance if firms have indulged in price wars or there are some other indication to prevent the entry of new firms. Concentration and Firms Size: Large firm size with high concentration index makes collusion easier (Grout and Sonderegger, 2005). With economies of scale, firms can indulge in price wars to deter the entry of new firms. In the get study, Concentration index for top three large firms, denoting the market share of top three firms by market size, has been taken into placard (C3). Demand Variability: A stable demand encourages the institution of a cartel and its persistence over a achievement of time. If the demand is... If you want to get a full essay, prepare it on our website: Orderessay

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