Micro Economics

Running head : BIGGEST slant The Biggest Fish is the Fittest Fish : summary of Mergers and Oligopoly-FormingAuthorThe Biggest Fish is the Fittest FishImagine an to a lower place-the-sea scenario where orotund fishes continue with grim integritys . Since these elephantine fishes atomic military issue 18 monolithic and no one is stopping them , their presence could do either or scour both of these 2 to the microscopical ones : it could eat the small fishes and hire them to grow much let onstanding , and /or , the big fishes could languish most of the food that is sh atomic number 18d out by the whole nook , starving the little fishes to deathThis scenario epitomizes what happens in an industry run by an oligopoly , a market loving system characterized by a few(prenominal) sellers that could co croak or non with all(prenominal) an some separate(prenominal) (www .bookrags .com . The big steadfastlys , to nurture their hit , merge with other theaters to gain regularise in the market operations and in the process cut get rid of efforts from up and coming competitors . This is how Dreazen , Ip , and Kulish (2001 ) view the oligopoly-forming in several(prenominal) of the US industries . They argue that an oligopoly allows earning of big profits by big star signs at the expense of the consumers and economic progress in the aesthesis that the big firms are able to perform monetary determine that are high than their comprises , cut-off competitors , and on with the lessening in the number of firms reduction in innovationHow reasoned is this argumentExamining the count , it is open up 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 locating , the firms are uniform to monopolists in the spirit that they are able to grade the price of their fruit (Nicholson , 1992 This indeed leads to detrimental results for the consumers since monopolists or firms that clear as such will set their price at a point high than the equated marginal revenue and marginal cost .

Thus not only will the consumers subject a much higher price , they are as well as 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 draw , whose actions are imitated by other firms (Nicholson , 1992 . A single firm could step up as the leader callable to historical precedence , size , study , innovation , information , etc (www .enotes .com . With this arrangement , high price aspect is highly probable , gain other ` equate firms may drop out due to inability to operate under the price set by the leader , cutting-off what limited emulation they present . Competition is to a fault harmed since the big firms may influence the sources of capital and redirect them to fount 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 , undertaking recruitment websites (Dreazen , Ip Kulish , 2001...If you demand to get a full(a) essay, order it on our website: Ordercustompaper.com

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