How Oligopolies rule our world:
What's an Oligopoly?
An Oligopoly is a market where only a handful of companies sell a specific good or service. Usually, this means their products and prices are very similar.
Are there that many Oligopolies?
Most definitely yes!
Many of the biggest markets, such as smartphones, GPUs, telecommunications, and even car manufacturing are control by only a handful of very big companies.
Despite being one of the biggest markets in our world, most desktop PCs use one of two operating systems, according to Statcounter:
- Windows - 75.9%
- macOS - 16.7%
The power of Oligopolies
By their sheer size, Oligopolies have immense power, sometimes being almost at the same level as some local and even national Governments.
Beyond their size, they can influence markets and consumers by:
- Marketing ideas, not just products
- Lowering or raising prices in order to change what we buy
- Sponsoring influencers
All of these can be amplified by collusion between the few companies that run the Oligopoly.
Collusion happens between two companies when they agree to do something that increases both their profits.
For example, they could raise their prices, or lower their marketing budgets.
As there is little to no competition, they can do so without worrying about their customers switching to another business that offers a similar product.
This agreement can be explicit, which is illegal, or implicit, meaning that there is no binding contract between the two companies, but they both do it because it benefits them both.
This can be bad for consumers because they can end up paying more for the same product. Or instead, they might end up with little to no customer support after they buy their new tech gadget, as they have no alternatives to buy from.
Although Oligopolies are better than Monopolies in most cases (because there is always some competition) they are not ideal, in the sense that they wield a lot of power, and are only accountable to their investors and, to some extent, their customers, not to the ones whose lives they're affecting and influencing.
Do you know of any recent examples of Oligopolies leveraging their positions in order to increase their profits even further?
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Take a look at my last posts, about Monopolies:
- What really are Monopolies? Why are most of them considered 'bad'?
- Why some Monopolies are allowed and even encouraged!
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