Here you can read our FREE Guide on ECO 201 Module 7 Simulation Discussion: Oligopolies, and see its solution.
Instructions of ECO 201 Module 7 Simulation Discussion
NOTE THAT A CUSTOM RUBRIC IS USED FOR THIS DISCUSSION.
An oligopoly is a market structure in which only a few sellers produce similar or identical products. Oligopolies are price-setters and can collude to behave like a monopolist.
First, play the simulation game Cournot in the MindTap environment. In this discussion, you will share your experiences playing that game. Your work in this discussion will directly support your success on the course project.
In your initial post, include the image of your simulation report in your response. See the How to Submit a Simulation Report Image PDF document for more information. Then, address the following questions:
What are the main features of an oligopolistic market?
How do oligopolies set their prices?
Explain how you can distinguish a firm in an oligopolistic market from one in a monopolistic competitive market. Provide examples to illustrate.
In your responses, comment on at least two posts from your peers by providing examples from the news of oligopolistic markets. Compare and contrast with examples of monopolistic competitive markets.
To access your simulations, click the simulation link found in the module.
To complete this assignment, review the Module Seven Simulation Discussion Rubric.
Step-By-Step Guide on ECO 201 Module 7 Simulation Discussion: Oligopolies
Introduction to ECO 201 Module 7 Simulation Discussion
This Owlisdom How-To Guide is intended to assist you in understanding the dynamics of oligopolistic markets as part of their economics course. By exploring the distinctive features of these markets, their pricing strategies, and how they differ from monopolistic competition, you can quickly solve ECO 201 Module 7 Simulation Discussion: Oligopolies. This knowledge is fundamental in analyzing real-world economic scenarios effectively.
What are the main features of an oligopolistic market?
Features of Oligopolistic Markets
We will play the simulation game instructed to solve the ECO 201 Module 7 Simulation Discussion: Oligopolies. Then, we will discuss the main features of an oligopolistic market.
- Identify the small number of firms that dominate the market, highlighting their market power.
- Discuss the high barriers to entry that protect these firms from new competitors.
- Explain the concept of interdependence among oligopolistic firms, where each firm’s actions affect the others.
- Oligopolies are characterized by few companies holding significant market control, making it difficult for new entrants and leading to strategies often responsive to competitors’ actions.
Example
The increased obstacles to entry are the second characteristic that sets an oligopolistic market apart. (Mankiw, 2021). Because of the high initial expenses and diminished competitive advantage you will have over already established enterprises, it isn’t easy to enter a booming market. An attribute of oligopolistic markets that sets them apart is their interdependence. Interdependence occurs when the pricing or marketing tactics of another impact a firm. Companies frequently don’t cut expenses in oligopolistic markets in an effort to obtain a competitive advantage.
How do oligopolies set their prices?
Pricing Strategies in Oligopolies
Next, in ECO 201 Module 7 Simulation Discussion: Oligopolies. We will discuss the pricing strategies of oligopolistic markets.
- Describe how oligopolists weigh the production effects against the pricing effects when setting prices.
- Explain scenarios where firms might increase production to boost sales without sacrificing profit margins.
- In oligopolies, pricing is strategic and often involves considering how price changes affect overall market dynamics, not just individual firm outcomes.
Example
Oligopolists must balance their impact on pricing and production when determining prices. The manufacturing effect of providing only one additional gallon will increase earnings when the price is higher than the marginal cost. In reaction to pricing adjustments, water firms are increasing output in order to improve overall sales without compromising profit margins. The owner will boost production if the impact on output outweighs the impact on price. The owner won’t increase production if the effects on cost outweigh the benefit.
Explain how you can distinguish a firm in an oligopolistic market from a monopolistic competitive market. Provide examples to illustrate.
Distinguishing Oligopolistic Firms from Monopolistic Competition
This section of ECO 201 Module 7 Simulation Discussion: Oligopolies will explain the difference between monopolistic and oligopolistic competition.
- Compare the competitive environment and barriers to entry in oligopolies versus monopolistic competition.
- Use examples, such as hotels for monopolistic competition and large utility companies for oligopolies, to illustrate these differences.
Example
Businesses that engage in oligopolistic behavior can be identified as monopolies by a number of essential traits. Minimal amounts of competition and significant entrance restrictions characterize oligopolies. In contrast, Monopolies allow for limitless opportunities to enter and leave the marketplace and a large number of small businesses providing comparable or identical products and services. An oligopolistic market is one where a handful of enterprises dominate the market. In their industry, very few companies have undue power and those who do often collaborate to their detriment as customers. One of the best examples of monopolistic competition is the hotel industry. These companies are fierce competitors, but they all have something special that sets them apart.
In your responses, comment on at least two posts from your peers by providing examples from the news of oligopolistic markets. Compare and contrast with examples of monopolistic competitive markets.
Peer Responses
Responding to peers is one of the vital parts of the ECO 201 Module 7 Simulation Discussion: Oligopolies posts. We need to provide at least two peer responses. I will provide one example post. You can write your peer responses by keeping the below points in mind.
- Engage with at least two peer posts, providing thoughtful comments and drawing on real-world examples.
- Compare and contrast the examples provided by peers with those of well-known oligopolies and monopolistic competitive markets.
Response 01
Hey Jordan! You did a great job explaining the complexities of oligopolistic markets, like the high barriers to entry and the interdependence among firms. For instance, major airlines like Delta and United often demonstrate oligopolistic behavior as they set competitive prices that others in the industry usually follow, impacting overall market pricing strategies. On the contrary, the restaurant industry exemplifies monopolistic competition, where many establishments offer similar yet slightly differentiated products, allowing for easy market entry and exit (Dam, 2019). Each has unique traits affecting pricing and competition strategies.
Response 02
I have addressed the given instructions in one response. Following these instructions, you can quickly write your peer responses to Simulation Discussions without a hassle.
Closing
Understanding oligopolistic and monopolistic competitive markets is essential for analyzing economic environments effectively. Through ECO 201 Module 7 Simulation Discussion: Oligopolies, you will explore critical aspects of these markets, enhancing your ability to apply economic theories to academic and real-world contexts. You can also read our ECO 201 next module, 8-1 Project Submission.
References
Dam, A. V. (2019, October 17). Analysis | Economists identify an unseen force holding back affordable housing. Washington Post. https://www.washingtonpost.com/business/2019/10/17/economists-identify-an-unseen-force-holding-back-affordable-housing/
Mankiw, N. G. (2021). Principles of Economics (9th edition). Cengage Learning, Inc.
