Monopolies Duopoly and Oligopolies in Australia-Free-Samples

Question: Discuss about the Monopolies, Duopoly and Oligopoly in Australia. Answer: Introduction Depending on the presence of number of buyers and sellers in the market, different form of market exists in the economy. Other than perfectly competitive market, all other forms of market are known as imperfectly competitive market. In every form of imperfectly competitive market, sellers enjoy some market power. The extent of market power varies depending on the specific form of market. In the paper, prevalence of imperfectly competitive market in Australia is examined. Like any other nation, there is a long held monopoly structure in the telecommunication industry in Australia. Telstra is the monopolist in market. However, with increasing competition from a close rival, Singtel-Optus the structure is becoming a duopoly one. A recent article published on the possibility of having a duopoly structure in phone and internet market is reviewed. Essence of the story In Australia, there are duopoly structures in the supermarket and airline business. Woolworth and Coles are the two-duopoly players in the supermarkets. In Airline Qantas and Virgin Australia are running the duopoly business. The next segment in the Australian economy that is going to experience a duopoly structure is the telecommunication sector. The chief executive of Optus their marketing strategy and corresponding market share as published in the The Sydney Moring Herald (Ramli, 2017). The other large telecom companies include Vodafone Hutchison, TPG telecom and one or more others. They are also trying hard to increase their market share but Singtel- Optus alone left all these competitors behind. TPG telecom has overtaken iiNET increase its strength in the telecom industry but this does not make any major difference I the composition of telecom industry. Telstra has successful in retaining its market share because of providing customers a reliable network connection high quality bandwidth. Market data reveals that customers in telecom industry value network quality more than the price. Many of Vodafone subscribers has switched from Vodafone to Telstra or Optus because of poor quality interrupted services. Optus thus attempts to increase their quality of services in addition to serving their customers with cheaper service. Optus is quite success full in offering a satisfactory phone and internet service. More than 60 percent internet subscriber now opt either Telstra or Optus service. In case of mobile industry, the percentage is even higher. 80% people in Australia services of either of the two large players (Bragg Christian, 2017). Economic theories and concept Oligopoly An oligopoly market is characterized as having numerous buyers and a few sellers. Rivals follow the strategies of each other to increase their market share. Sellers in the market often face a kinked demand curve for their products (Whitehead, 2014). The kinked demand curve has two types of elasticity in its two parts. In the inelastic part a price war is observed among the sellers top undercut the market share of each other. Figure 1: Oligopoly Market with Kinked demand curve (Source: As created by Author) The kinked demand curve is ABC as shown in above figure. Equilibrium point is E as obtained from the profit maximizing condition, Marginal Revenue (MR) = Marginal Cost (MC) (Fershtman de Zeeuw, 2013). Rival sellers in the market reduce their price below the equilibrium. Once one firm do that other also do the same and this triggers a price war in the market. In the telecommunication industry, few large players are Telstra, Optus, Vodafone, TPG. Each offers attractive prices to the customers to increase its own market share by undercutting others. Among them Telstra acquires the largest market share (Shahiduzzaman Alam, 2014) Duopoly The oligopoly structure in the market transforms to a duopoly structure when two large firms serve all buyers in the market. As there are only two firms in the market, market concentration is greater in duopoly as compare to oligopoly (Shepherd, 2014). The monopolist position of Telstra is likely to be threatened with the rise in share of Optus. Monopoly A Monopoly is a market structure dominated by a single seller. Among all the forms of imperfectly competitive market monopoly market is the one where seller enjoys most advantageous position. The monopolist is completely able to supply a very low quantity at a very high price grabbing the entire surplus in the market (Mahanty, 2014). The monopolist often goes for price discrimination to increase the surplus enjoyed. Figure 2: Market with monopoly seller (Source: as created by Author) The figure above describes a monopoly market. Given complet5e control over price and quantity it is possible for the monopolist to enjoy an economic profit even in the long-run in contrast to a competitive market (Holian, 2014). The shaded region shows the prospective economic profit in the monopoly market. Recommendation Transport and communication are two important pillars of economic growth. Hence, development of these two sectors is important. There is no doubt that Telstra is doing best in providing its customers a steady mobile and internet service. However, the quality is often undermined by its high cost. Customers having medium to low affordability often look for a comparatively cheaper network connection. This is one factor responsible for recent undercut of Telstras market share. Thus, Telstra should consider revising its price to retain its market share. Optus on the other hand, should work on improving the quality of its services. By offering cheaper package plan Optus though successful in increasing the number of its customers there are still some question on the reliability of the network service. Once Optus overcome the barriers of quality it will come at par with Telstra. Conclusion The evaluation of the articles reaches to the conclusion that telecom industry in Australia has received another big player, Singtel-Optus. With this the monopoly structure or otherwise monopoly structure will be reduced to a duopoly one. This benefits the Australian customers by providing them another reliable yet comparatively cheaper service provider. Previously they have only one choice for having a quality choice. With efforts made by Optus in improving its services, there is high chance of breaking the monopoly of Telstra. Some recommendations have been made for both Telstra and Optus, which can benefit concerned company and customers in general. References Bragg, J., Christian, R. (2017).Telstras Mobile Market Share In Decline | channelnews.Channelnews.com.au. Retrieved 17 August 2017, from https://www.channelnews.com.au/telstras-mobile-market-share-in-decline/ Fershtman, C., de Zeeuw, A. (2013). Possible inefficiencies in a duopoly trading emission permits.Strategic Behavior and the Environment,3(4), 279-303. Holian, M. (2014). Principles of Microeconomics. Mahanty, A. K. (2014).Intermediate microeconomics with applications. Academic Press. Ramli, D. (2017).Optus chief predicts telecommunications duopoly with Telstra.The Sydney Morning Herald. Retrieved 17 August 2017, from https://www.smh.com.au/business/australias-phone-and-internet-market-could-become-duopoly-says-optus-chief-20150604-ghgm5b.html Shahiduzzaman, M., Alam, K. (2014). Information technology and its changing roles to economic growth and productivity in Australia.Telecommunications Policy,38(2), 125-135. Shepherd, G. (2014). Critique of the new NBN policy.Australian Journal of Telecommunications and the Digital Economy,2(4). Whitehead, J. (2014).Microeconomics: a global text. Routledge.