Oligopoly in the Aircraft Market Mathematics & Economics Essay

Oligopoly in the Aircraft Market
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Abstract
Oligopoly refers to a form of market where only a small number of players are involved. There exist barriers to entry into the market, and hence the number of players remain low. Some characteristics of the market include perfect knowledge of the market by all players and interdependence among the players. The players may collude to fix prices in order to maximize profits, or they may compete on non-price terms. The Airbus and Boeing dominance of the aircraft industry is an example of an oligopoly. Though the industry traditionally consisted of a number of players, the two giants edged them over time to create a duopoly. Even though the duopoly is being threatened by emerging rivals, the two firms are bound to keep the dominance due to the technological and financial advantages they have over the new entrants.
Oligopoly in the Aircraft Market
An oligopoly refers to a market or industry that is dominated by few sellers. These sellers are usually large and are referred to as oligopolists. A duopoly is a form of oligopoly where the market is made up of only two players. Oligopoly arises from collusion that results in reduced competition and high prices for consumers. Where the existing firms collude, the arrangement is known as a cartel. On other circumstances, the existing firms fiercely compete leading to the creation of almost perfect competition. There exist barriers to the entry of other firms in the industry such as high investment, economies of scale and consumer loyalty. Oligopolies exhibit a unique market structure, and each oligopolist is always aware of the actions of the other. The decisions of each of the oligopolist also affect the other. The main characteristics of oligopolies include the ability to set prices, profit maximization conditions, the existence of barriers to entry and exit from the industry, long-run profits, product differentiation, non-price competition, perfect knowledge, and interdependence. This paper seeks to explore the oligopoly that exists in the aircraft market about the dominance of the industry by Boeing and Airbus.
Development of th...