3. Oligopoly Oligopoly is a a market structure with several _________ sellers. A market structure with only two sellers is called a _______. dominating duopoly MARKET sellers

4. Features Several Oligopoly ______ dominant sellers. Sellers are interdependent. Oligopolists sell heterogeneous or homogeneous goods. Entry is _________________. ________ information of the market. restricted or difficult Imperfect

5. Oligopolists are ____________. If one firm lowers the price, others will follow. Firms can influence ______. They have to search for a price which maximises their ______. Behaviour of firms prices 1. Oligopolists are price searchers profits Oligopoly 2. The possibility of price war interdependent price wars So _________ may break out and some firms may go out of business.

6. In some oligopolistic markets, dominant sellers may act as ______ in initiating ____________. Behaviour of firms Oligopoly 3. Price leadership leadersprice changes smaller firms The ___________ will then follow. price $ $

7. Behaviour of firms Oligopoly Firms often engage in __________________. 4. Non-price competition non-price competition Example Lucky draws organised by supermarkets.

8. Monopolistic competition is a market structure with the features of both ________________ and _________. Monopolistic Competition perfect competitionmonopoly Features similar to perfect competition Features similar to monopoly A large number of _____ and ______ sellers buyers ____ entry and exit Free ____________ goods Heterogeneous Perfect / Imperfect information of the market

9. As the firms sell differentiated products, they can influence the __________ of the good. They have to find the price which maximises their ______. searchers market price profits Behaviour of firms Monopolistic Competition Monopolistic competitors are price ________. _________ competition Non-price

10. Quiz One Identify the market structure of the International Direct Dialing (IDD) services in Hong Kong. The market is dominated by several major seller like: Oligopoly PCCWHutchison Global CrossingNew World Telephone New T&T

11. Quiz Two Suppose the costs of providing IDD services are lower due to technological progress. If PCCW lowers its price, what will be the actions of other IDD service providers? Other firms will _____ their prices when PCCW lowers its prices. Since the market structure of IDD services is an oligopoly, the decisions made by firms will be _______________. interdependent lower

12. Quiz Three What is the market structure of newspaper stalls in Hong Kong? Explain. It is _______________________ as the features of both ___________________ and _________ are present: monopolistic competition perfect competitionmonopoly ______ number of groceries in Hong Kong entry into the market is _____ as only a small amount of capital is required goods sold in different groceries are regarded as ______________ by consumers __________ information of the market large easy heterogeneous imperfect

13. Several dominating sellers A _____ share of the market demand is satisfied by several dominant sellers. Example s : large Oligopoly

14. When a firm’s action of cutting prices is met by a price reduction by other firms, a ________ may break out. The sellers will consider their ___________________ in deciding their business policies. competitors’ responses Example s : Oligopoly Sellers are interdependent price war price

15. Consumer goods like butter tend to be ____________. Oligopoly Oligopolists sell heterogeneous or homogeneous goods Raw materials like petroleum tend to be ____________. homogeneousheterogeneous

16. __________ control Oligopoly Entry is restricted or difficult Reasons for difficult entry: economies of scale reputation advertisement costs Existing firms enjoy ________________. Existing firms have already built up their _________, so heavy _______________ are required to compete with them. Government Economies of scale Heavy advertisement costs Government control

17. Oligopoly Imperfect information of the market Neither the ______ nor the ______ are fully aware of the cost, price, quality and quantity sold by different sellers. sellersbuyers Shop XShop Y What’s the price in Shop X? What’s the price in Shop Y?

18. ___________________ may be due to differences in quality, package, design and advertisement, etc. Product differentiation Monopolistic Competition Heterogeneous goods

19. End