Cartel
is a formal agreement between firms to
regulate market supply and price of the
product. [OPEC (Organization of Petroleum exporting countries) is an example
for Cartel]. Cartels and any forms of
Price collusion were against public interest and they are forbidden in most
countries.
Duopoly
is referred to as a situation where only two firms are operating ( generally
mean to dominate control the product market). Global scenario - In detergent market
Unilever and Procter & Gamble; In passanger
aircraft Boeing and Airbus; With in a
Nation – In telecom market – Dhiraagu and Wataniya are example.
Barriers to entry to an industry are of two types -
1)
Natural
Barriers to entry
Natural
Monopoly: - One firm is able to produce the entire market supply
at a lower average cost per unit than a number of smaller firms added together.
Capital
Size:-
Huge initial capital is required to establish the production.(e.g. Electricity
from Nuclear power).
Historical
reasons:- An established consumer base because of their
operation in the market for a very long time with reputation. (e.g. Lloyds of London has a
long term reputation in the insurance market)
Legal
Consideration:- There are certain laws restricting the
entry of firms into the industry by the government.(e.g. Patent right, copy
right, etc.)
2)
Artificial
barriers to entry
Restriction
on suppliers:- Monopolist threaten suppliers that they
will go to another if they supply the raw materials to others.
Predatory
pricing:- Monopolist sell their product below its cost of
production in short run.
Full
line forcing:- Forcing the retailers to keep stock
and sell full range of their products
Exclusive
dealing:- Preventing retailers from dealing with similar
other products.