Micro Economics

Running head : BIGGEST FISH The Biggest Fish is the Fittest Fish : delimitate of Mergers and Oligopoly-FormingAuthorThe Biggest Fish is the Fittest FishImagine an under-the-sea scenario where orotund fishes dwell with grim ones . Since these titanic fishes atomic number 18 big and no one is stopping them , their presence could do either or even both of these two to the gloomy ones : it could eat the small fishes and use them to grow much smashing , and /or , the big fishes could consume most of the food that is sh argond push through by the whole niche , starving the little fishes to deathThis scenario epitomizes what happens in an industry run by an oligopoly , a market neighborly system characterized by few sellers that could co croak or not with all(prenominal) an other(a)(prenominal) (www .bookrags .com . The big steadfastlys , to further their benefit , merge with other bulletproofs to gain influence in the market operations and in the process cut off efforts from up and coming competitors . This is how Dreazen , Ip , and Kulish (2001 ) view the oligopoly-forming in several of the US industries . They argue that an oligopoly allows earning of big profits by big smasheds at the expense of the consumers and sparing progress in the sense that the big firms are overmaster to set monetary values that are higher than their comprises , cut-off competitors , and on with the lessening in the number of firms reduction in innovationHow sound is this argumentExamining the count , it is shew that with two exemplars of oligopoly namely the Bertrand and Stackelberg models , this argument had found its grounded proofIn the Bertrand model , it is assumed that firms set their expenses . Under this location , the firms are uniform to monopolists in the sense that they are able to rank the pri ce of their output (Nicholson , 1992 This in! deed leads to detrimental results for the consumers since monopolists or firms that pack as such(prenominal) will set their price at a point higher than the equated marginal revenue and marginal cost .

Thus not only will the consumers depend a much higher price , they are alike supplied with lesser quantity of output (Krugman and Obstfeld , 2000Steckelberg model s scenario is that of a firm which serves as a attracter (usually a price leader , whose actions are imitated by other firms (Nicholson , 1992 . A single firm could step up as the leader callable to diachronic precedence , size , reputation , innovation , information , etc (www .enotes .com . With this arrangement , high pri ce setting is highly probable , incontrovertible other ` equate firms whitethorn drop out due to inability to operate under the price set by the leader , cutting-off what limited competition they present . Competition is alike harmed since the big firms may influence the sources of capital and redirect them to lodge the large firm s benefit . This is largely evidenced by the unprecedented back-out of investors in up starting companies that are seen as challenge to the large firms in oligopoly-run industries in the US such as telecommunication , textbooks , job recruitment websites (Dreazen , Ip Kulish , 2001...If you indispensability to get a full essay, order it on our website: OrderEssay.net

If you want to get a full information about our service, visit our page: write my essay