Oligopolies

Oligopolies may sound like a strange, unknown term to many, but one can be impressed on its importance and impact on today's society. Oligopolies arise from the simple grounds of a capitalistic market due to the competition and the strategic mindsets within. Even though the capitalistic system allows for new competitors to enter the market, in the presence of oligopolies it is quite difficult. Oligopolies are a small number of firms that have all or most sales in a specific industry; placing barriers for small creators and rising companies. The barriers produced by these large companies are hard to overcome because of the power and control that they possess. For example, there are two main dominating operating systems for smartphones: Apple’s IOS and Google’s Android. With these two powerful companies having most of the market, other people that want to create a type of phone operating system will not have the credibility, trust, loyal customers, and resources that these companies have; therefore, failing to coexist with the oligopoly.

Oligopolies have a lot of power and can have terrible effects in the market for their consumers and other companies. In this system, companies are meant to sustain a healthy competition between them, but sometimes they don’t always treat each other as their biggest rivals; instead, they treat each other as cooperators that aim to increase both of their incomes while hurting their own consumers. Even though this is illegal in most countries, it is hard to prove when companies decide to do this. This malicious practice of colluding implies charging the buyers a higher price for the same good. If this is done properly, it brings two main benefits; more money is given to the company because of the profit margin in the sales and also it takes away the fear of losing its customers to the competition when it increases its prices.

Even though companies can have immoral tendencies, there is also a positive and correct way to manage a company operating within an oligopoly. When the conditions of an oligopoly are proper, the prices of products sold by a company are decided upon its competitors’. Not only are the prices determined through their competitors’, but through a theoretical framework called “Game Theory ''; meaning that companies attempt to reach a better price than their competition to obtain the best profit and vice versa. The balanced rivalry causes the market to be more positive for the consumer and the companies; creating the best prices for both parties. When the rivalry starts being less about the price of the good, it makes the companies focus on Product Differentiation; which consists of making the product different, unique, and better than what other companies are offering. Which at the end of the day, benefits the customer; fulfilling what all companies should be striving to do. Oligopolies can be both detrimental or beneficial but it all depends on the morality that the companies are run by. Is this enough to rely on? Or should governments dissolve oligopolies to create even more competition?