effective use of products. Growth through merger is another characteristic having to do with the merging of other companies to gain a substantial increase in market share, greater economies of scale, more buying power and other firms they couldn’t achieve when they were smaller firms. Mutual dependence is another characteristic when there are only a few firms in a market, it matters very much to each firm what its rivals do; reaction of competitors when setting prices and different strategies to anticipate the other firm reaction. Lastly, price rigidity and nonprice competition where firms find it more comfortable to maintain constant prices and to start other forms of competition like advertising and offering exceptional customer service. Price reductions will come only when the demand is really weak or there is a high demand on capacity. Well, I have explained the different characteristics that oligopolistic markets have in common, but like I said before, airlines share unique characteristics as oligopolists.
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- Spring '12
- Economics, Airline Economics