United States or Germany ? Vote for the TOP Country of the Week !
Baumol maintains that oligopolies are the real engines of growth and higher living standards and urges antitrust authorities to leave them be. Lower regulatory costs, economies of scale and of scope, excess profits due to the ability to set prices in a less competitive market allow firms in an oligopoly to invest heavily in research and development.
Only firms with a dominant market share have both the incentive and the wherewithal to invest in R&D and in subsequent branding and marketing. But oligopolies in deregulated markets have sometimes substituted price fixing, extended intellectual property rights, and competitive restraint for market regulation.
In a paper published last year and titled "Productive Differentiation in Successive Vertical Oligopolies", that authors studied: "An oligopoly model with two brands. Each downstream firm chooses one brand to sell on a final market.
But the supply of innovators and new technologies is infinite and the resources of oligopolies, however mighty, are finite. The market is stronger than any of its participants, regardless of the hubris of some, or the paranoia of others. Moral Hazard and the Survival Value of Risk By: Dr. Sam Vaknin Also Read: The Business of Risk Risk transfer is the gist of modern economies.
These and other insights were incorporated in a theory of market contestability. Contrary to classical economic thinking, monopolies and oligopolies rarely raise prices for fear of attracting new competitors, went the new school. This is especially true in a "contestable" market where entry is easy and cheap.
Victory is not guaranteed, losses loom constantly, investors are forever edgy, customers are fickle, bankers itchy, capital markets gloomy, suppliers beholden to the competition. Barriers to entry are almost always formidable and often insurmountable. In the real world, tacit and implicit understandings regarding prices and competitive behavior prevail among competitors within oligopolies.
Inflation targeting the latest fad among central bankers aims to curb inflationary expectations by implementing a consistent and credible anti-inflationary as well as anti-deflationary policy administered by a trusted and impartial institution, the central bank. The Benefits of Oligopolies By: Dr. Sam Vaknin
Oligopolies, they intone, restrict competition unfairly, retard innovation, charge rent and price their products higher than they could have in a perfect competition free market with multiple participants. Worse still, oligopolies are going global. But how does one determine market concentration to start with?
Still, Schumpeter believed in the faculty of "disruptive technologies" and "destructive creation" to check the power of oligopolies to set extortionate prices, lower customer care standards, or inhibit competition. Linux threatens Windows. Opera nibbles at Microsoft's Internet Explorer. Amazon drubbed traditional booksellers. eBay thrashes Amazon.
Oligopolies encourage customers to collaborate in oligopsonies and these, in turn, foster further consolidation among suppliers, service providers, and manufacturers. Market purists consider oligopolies not to mention cartels to be as villainous as monopolies.
Word Of The Day