The Application of the Oligopoly Concept in the Real World
They also have been in a position to extend the wars into that area of creativity and innovations just so as to woe the market to themselves. Both companies at the beginning of the year announced that they were in for a 30 dollar reduction of the unlimited voice calling packages. However collusion is also noted in these moves since the firms are interested in wooing subscribers to opt for data services that are charged higher. Even as the cellular firms are involved in the tug of war in terms of pricing and quality, the firms are very aware that profitability is vital. To this end then, the production and supply of their services is inclined in such a way that the marginal revenue is equal to the marginal cost. This in essence implies that the additional cost that Sprint incurs when introducing a new service is ideally equal to the additional revenue that would be realized per customer that it has.According to Bergin (2005) the oligopolistic market has witnessed immeasurable barriers to entry. Other mobile telephone companies that have tried to cut it in the American market have gone through very much struggle and difficulty yet most have not even been able to cut through.
Bergin, J. (2005). Microeconomic theory: a concise course. New York: Oxford university press.
Levine, D. (1981). The enforcement of collusion in oligopoly. Massachusetts: Massachusetts Institute of Technology.