The Argos and Littlewoods

Question: Write an essay onThe Argos and Littlewoods. Answer: The Argos and Littlewoods Plc. the two high street catalogue retailer united with Hasbro Limited in the toy market of United Kingdom. They are engaged in the price agreement with Hasbro. By deciding price of the toy by colluding or cooperating with each other, these three companies characterized the toy market as oligopoly market. The market is oligopoly in nature due to the limited number of firms that are the large (Sushko 2013). These two firms influences the price of the products of Hasbro and make agreement with this toy company regarding the price they will charge for the products from Hasbro. The toy market is characterized as oligopolistic market because; both Littlewoods and Argos sell identical toys from Hasbro in the market. However, these two firms are also engaged in the differentiating the toys that it distributes by offering several varieties or offering a discriminative price from its competitor. In the toy market, there is barrier to entry. This is because; it is qui te hard for the new firm to compete with the already established big enterprises. It cannot take full advantage of the market as the existing firms like Agros and Littlewood Plc have already captured a significant share of the market. In the oligopoly market structure, the numbers of producers are less. As a result of this, the firms are interdependent. One producer considers the reactions of the rivals before taking an action. This allows the firm to be engage in the collusion. The firms under oligopoly might be co-operative or non-cooperative. The firms might co-operate while agreeing upon the price and quantity to be sold. This is a collusive model, where, firms agree to act together while deciding the price and quantity (Roux and Thni 2015). With agreement of setting price and quantity by all oligopolistic firms will extract same result like the firm under monopoly. The profit generated will be divided or shared among the firms that have participated in the market. In this case, the co-operative collusion would take place. In some cases, it might happen that no matter of what actions the rival firms are taking, the firm has the best strategy. This is dominant strategy. The firms may be non-cooperative and make decision based on expectations, and guesses. This is non-collusive behavior (Okuguchi 2013). Through equilibrium, the outcomes are realized, as the firms do not communicate directly. This extracts the same results like the firms under perfect competition. This is less profitable and hence there is possibility that the firms collude with each other. The firms face threats of retaliation if they take non-cooperative strategy; therefore, this possibility of the oligopolistic market structure led the firms to collude in the market. The collusion may not be cheat-proof in an oligopolistic model. The firms engaged in an oligopoly market can cheat on the cartel agreement (Escrihuela Villar and Guilln 2014). Suppose the collusive firms decided to charge monopoly price for a certain level of output. However, one can cheat by charging lower price and expand their share of output. The government of India operates the Indian Railways. There a re huge numbers of buyers of the railway services, but there is one sole service provider in this sector. Hence, it is characterized as a monopoly market. Since there are no other firms in this market, the railway board enjoys the market power and decides the fares or charges of availing this service (Agarwal 2014). It enjoys the monopoly power. Moreover, there are restrictions from the legislations that no company can enter this market; therefore, there is also barrier to enter the market. In addition to this, infrastructure of this sector requires huge initial investment, which is quite impossible if government has not occupied this sector. The development of the railway service also requires R D activities. Hardly any private firm will take up this initiative, hence, all the features of Indian Railways indicates that it falls under the monopoly market. If this market had been a monopolistically competitive, the government would have lost some of its power over the price determina tion. The price charged by the railways would have been competitive. Moreover, there will be tough competition among the firms, in terms of price setting; quality of services; punctuality of the train timings and so on. The railways of India would have been more efficient in nature. References Agarwal, S., 2014. Indian Railways: A Monopoly Organisation.International Journal of Innovative Research and Development,3(10). Escrihuela Villar, M. and Guilln, J., 2014. On the Sustainability of Collusion in a Differentiated Oligopoly with a Cartel and a Fringe.Bulletin of Economic Research,66(S1), pp.S132-S137. Okuguchi, K., 2013.Expectations and stability in oligopoly models(Vol. 138). Springer Science Business Media. Roux, C. and Thni, C., 2015. Collusion among many firms: The disciplinary power of targeted punishment.Journal of Economic Behavior Organization,116, pp.83-93. Sushko, I. ed., 2013.Oligopoly dynamics: Models and tools. Springer Science Business Media.