Running head: AIRLINE ECONOMICS 1 Airline Economics BSAB 415 July 21st, 2016 William Pickron
AIRLINE ECONOMICS 2 Airline Economics I. Describe the general characteristics of oligopolies. The word oligopoly (noun ol·i·gop·o·ly \- gä-p -lē\) was first known to be used in 1895 ˈ ə (merriam-webster.com, 2016). The word Oligo comes from the Greek word for few and poly comes from the Greek word sellers. It is true that the prefix poly means many but in this contest, it originates from the Greek word “polian” or “polie” which actually originates from the word seller. (khanacademy.org, 2016). According to Wensveen, oligopolistic industries tend to share several characteristics a) Substantial Economies of Scale. Firms in oligopolistic industries require large-scale production to obtain low unit costs. Mass production is supported by intensive labor and management specialization of job responsibilities, utilization of the most efficient technology available, and efficient use of by- products (Wensveen, 2011). b) Growth Through Merger. Many of the oligopolies that exist today have resulted from mergers of competing firms. The purpose of most mergers is to gain a substantial increase in market share, greater economies of scale, more buying power in the purchase of resources, and various other advantages that smaller firms do not possess to the same extent (Wensveen, 2011). c) Mutual Dependence. The little number of sellers in an oligopolistic industry makes it necessary for each seller to consider the reactions of competitors when setting prices. In this sense, the behavior of
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- Fall '16
- Kelly Lawton
- Economics, Airline Economics