Duopoly and Oligopolies in Australia-Free-Samples-Myassignmenthelp

Question: Discuss about the Monopolies, Duopoly and Oligopolies in Australia. Answer: Introduction Market provides a common platform for exchange of goods and services between buyers and sellers. In economics, any type of exchange relation in defined as market. The most ideal form of market is perfectly competitive market where several buyers and sellers compete in common place. In reality, no form of market is perfectly competitive. The forms of market mostly found belong to imperfect competition. Monopolies, duopoly and oligopolies are some of the commonly discussed market structure. In Australia, imperfectly competitive market structure exists in different form. The paper briefly discusses these markets structures making use of related microeconomic theories. Brief article story Concentration of market is a common feature of small open economy. Australia seems as a concentrated country if viewed from market structures of airlines, mining industry, supermarkets and energy companies. The article scrutinized market concentration in Australia. Australian banking is not the only sector having large players capturing major market shares. In the airline market, two big players are Qantas and Virgin holding 95 percent market share together. Woolworths and Coles are two dominating names in the grocery supermarket. Telstra holds almost a monopoly position in telecommunication (theaustralian.com.au 2017). Concentration encourages the small number of sellers to innovate new production technique to have an additional competitive edge over its competitors and hence contribute to productive efficiency. On the other hand, if sellers do not initiate productive efficiency and only enjoy their market power then there is inefficient allocation of resources. In most of the advan ced economies, large firm domination is an important aspect. In the internet market, Google enjoys more than 90 percent share. For US oil production, John Rockefellers behemoth Standard oil control 64 percent production. With passes of time, concentration has become more prevalent. Even a decade ago, car manufacturing, banking and mining are not so much concentrated as they are now. In the monopoly market, where a single seller controls majority of market share the biggest threat is an unexpectedly high price with a limited production. The monopoly market becomes a serious concern if there is no innovation and potential competitors putting threat to monopoly position. Firms grow large depending on their good and consistent performance. The small businesses in Australia having no more than 20 employees practically has no contribution in the job growth from 2009 (heraldsun.com.au 2017). In contrast, big size firms already having a large employee strength (200 or more) are responsible for more than three forth job creation for the similar period. Adam Smith in 18th century expressed concern for existence of monopoly. However, the type of monopoly Adam Smith talked about was the one created through gover nment grant, subsidies, regulation or other form of privileges. The monopoly created by commercial success of the firm the efficient form of monopolies. In Australia, existing oligopolies gain considerable support from government. Heavy hitters in Australians corporate and dominating players in stock market receives governments favor in terms of licensing and regulation playing an equivalent role as innovation. When monopolies created by government support then it is called natural monopolies (ausbt.com.au 2017). A classic example of natural monopoly is distribution of electricity network. Article evaluation using economic theories Evaluation of the article needs a close look at different market structures. Perfectly competitive market is an extreme form of market. Joan Robinson suggested the idea of free market as given by classical economist do not exists in real world. The market dominated by a single seller is termed as a monopoly market. In the market, the single seller serves numerous buyers and therefore has maximum market power (Baldwin and Scott 2013). The market power makes it possible for the monopolist to charge a high price on a comparatively low quantity supplied. Both in the short run and in the long-run the monopolist enjoys a significant profit margin. Adam Smith opposed monopolies created from government regulation. Most form of concentration in Australian market exists because of considerable government support. In telecommunication, finance, mining and property market Australian government created and favored large players (smh.com.au 2017). These form of monopoly as suggested by Adam Smith more often constitute inefficiency in the market. Entry barriers to new entrants is important for holding monopoly position. When natural barriers exist in form of government regulation then this is called natural monopoly. The large-scale operation of the single firm gives it benefits of scale economies (Lim and Yurukoglu 2015). The firm is able to operate at falling part of average cost. One natural monopoly market in Australia is electricity distribution. Another concentrated form of market is oligopoly market. Instead of having only one seller like monopolies, there are few large firms in the market. Strategy of one firm depends on the strategy of its rival firms (Belleflamme and Peitz 2015). One practical example of strategic interdependence is the price war among sellers. Duopoly market is a subset of oligopoly. When the number of sellers in the oligopoly market reduces to only two sellers then duopoly market formed (Dunne et al. 2013). Virgin and Qantas in airline, Coles and Woolworths in grocery supermarket are some duopoly player in Australia. Recommendation In the Australian economy, market concentration is observed in different areas. In a concentrated market, sellers are always at an advantageous position. When government supports concentration then the situation can even turn worse. Therefore, the government should allow concentration only where it is needed. For example, natural monopoly is a market where it is efficient for the market itself to have single seller. In other areas, government should encourage competition to allocate resources efficiently and enhance productivity. Conclusion In Australia market concentration found to exist in form of monopoly, oligopoly or duopoly market. Airline, baking, grocery market and telecommunication are some examples of concentrated industry. In these industries, one, two or four large players dominate the market. The big businesses with their expansion creates new job opportunities in contrast to almost stagnant small businesses. Some form of concentration in Australia has developed with assistance from government. References Australian Business Traveller. (2017).Borghetti defends the Qantas-Virgin duopoly. [online] Available at: https://www.ausbt.com.au/borghetti-defends-the-qantas-virgin-duopoly [Accessed 11 Dec. 2017]. Baldwin, W. and Scott, J., 2013.Market structure and technological change(Vol. 18). Taylor Francis. Belleflamme, P. and Peitz, M., 2015.Industrial organization: markets and strategies. Cambridge University Press. Dunne, T., Klimek, S.D., Roberts, M.J. and Xu, D.Y., 2013. Entry, exit, and the determinants of market structure.The RAND Journal of Economics,44(3), pp.462-487. Heraldsun.com.au. (2017).Local monopolies have better results. [online] Available at: https://www.heraldsun.com.au/business/study-finds-australian-monopolies-have-better-results/news-story/83436800178abede28b01f82135a5da5 [Accessed 11 Dec. 2017]. Lim, C.S. and Yurukoglu, A., 2015. Dynamic natural monopoly regulation: Time inconsistency, moral hazard, and political environments.Journal of Political Economy. Smh (2017). [online] Available at: https://www.smh.com.au/federal-politics/political-opinion/get-out-of-monopoly-free-cards-cant-be-left-to-the-roll-of-the-dice-20101026-172ax.html [Accessed 11 Dec. 2017]. Theaustralian.com.au. (2017).Subscribe to The Australian | Newspaper home delivery, website, iPad, iPhone Android apps. [online] Available at: https://www.theaustralian.com.au/business/opinion/adam-creighton/monopolies-advance-the-economic-cause/news-story/c6939962c6bdc71a3e8126ad6b971aff [Accessed 11 Dec. 2017].