All right, so let's move on to our next market structure. The oligopoly. And as you'll see, as we go through this unit, this is the odd one out. This guy kind of goes on his own accord here, and he's gonna follow some different rules. Alright, so let's dive right in the first thing here, a market is an oligopoly when the nature of the good for sale. Well, this doesn't really give us much information. The goods could either be identical or differentiated. Okay, so there's not really much we can get out of the nature of the good here. Alright, so it's either um identical or differentiated here. Right? So identical. That's when they're all the same. Right? You can't tell one farmer's wheat from another farmer's wheat. When we talk about oligopolies, one of the identical goods is aluminum. So, there's only a few producers of aluminum and that would be an oligopoly good. That would be identical, differentiated good would be something coke and Pepsi, right? It's like soda, there's only two big suppliers of it. So that would be a differentiated product in this market. So we're gonna see is that sellers in this market are gonna be price makers to an extent here. Okay, So when we talk about monopolistic competition, we see something similar where they do have some influence over the price, but not total influence over the price because they still have to deal with competition. Okay, so their price makers to an extent, and we see like we talked about before, right, there are a few producers in an oligopoly market. Right? So when we think of a classic oligopoly would be something like coca cola and Pepsi, right there, the two main producers of soft drinks, and they're gonna have to deal with each other when they're making pricing decisions, right? We're gonna say that these firms are interdependent. Okay. And when I say interdependent, that means that they have to depend on each other when they're making pricing decisions, right? If coca cola goes ahead and raises their price by a dollar, that's going to have a significant effect on their demand, right? Because a lot of people might go and, uh, drink Pepsi instead. Right? So if they dropped their price by a dollar, Pepsi might have to also match that price cut. Right? So they have to work strategically, make their decisions strategically based on their competitors decisions. So that's this interdependence between the firms, right? And we're gonna talk about market power here, right? Market power, that's the ability to have influence on the price. Okay. And we're gonna say that oligopolies do have quite a bit of market power, right? Because there's only a few firms in this industry, so they're gonna have some influence over the price, obviously, it's not gonna be as strong as a monopolies. Market power because the monopoly is, there's only one producer, right? So you can imagine that one producer is gonna have a lot of influence even compared to perfect competition, right? Where there's tons and tons of producers tons and tons of buyers. And there's no market power for anybody, Right? So here we do see that there is some market power for the oligopoly firms. Next let's talk about this entry and exit. So we talked about perfect competition. We said that firms could freely enter and exit the market, right? If you wanted to produce wheat, you go and you buy a farm, you start producing wheat easy enough. But here, what we're going to deal with is these barriers to entry, Right? Barriers to entry? Are things that are gonna block you. So, the entry to the market is blocked by these barriers to entry, Right? And we're gonna go into a little more detail of what these barriers to entry are. And you'll see when we study monopolies, or if you study them already that they're quite similar, right? You're gonna see almost exactly the same at barriers to entry in both chapters. Okay, so, last let's these example products, right? We've already mentioned a couple. We said coke and Pepsi. This is kind of the classic example of the oligopoly that you see everywhere coke and Pepsi or maybe something like these big retailers like walmart and Target. They don't have such a strong hold, right? There's other places to get goods, but they do own quite a huge chunk of the market there in retail goods. So walmart and target could be a good one, right? But the coke and Pepsi that that tells us about these differentiated goods, right? Because we talked about that they could be differentiated or identical, Right? So that would be an example of a differentiated oligopoly. And then aluminum was a good example of an identical product, oligopoly, right? Um, so yeah, with aluminum, there's just a few suppliers of this good, Um, and it just tends to have an oligopoly setting as well. Alright, so let's go ahead and pause here. In the next video, let's discuss those barriers to entry into the oligopoly market.

Alright, so now let's discuss some of those barriers to entry, right? These barriers to entry are making sure that other firms cannot enter the market, right? They're not gonna be able to enter because of these barriers. Okay, the first one here is ownership of key resources. So a really good example was this company de beers that supplies diamonds to the industry. Okay, For a very long time, they own substantially all the diamond mines in the world. Right? So you could imagine if you wanted to get into the diamond business, you'd probably have a pretty hard time, right? You would need some source of diamonds. And Debeers controls all of those sources of diamonds. So if you can't get diamonds, you can't get into the business right? You wouldn't be able to supply them. So that was a barrier to entry into that industry right now, you had no access to this key resource. These other companies already own them and you had no access. Okay, So that could be a barrier to entry. Next one is government regulation. So the government can make a legal barrier to entry. Let's say you invent some product, right? If you invent a product, you would go to the government and file for a patent. This patent would give you the exclusive right to produce it, right? You would be the only one who's allowed to produce it because you're protected by the law, You invented it and you have a patent. So if I go ahead and try and produce it, I wouldn't be allowed to write, you could sue me, you could come after me and get my money. Right? So you're legally protected um to to keep control of that product. Right? So that's a barrier to entry. I'm not able to get into that business and start selling that product because you are the only one that's allowed to produce it. Alright, The last one here is economies of scale. Okay, So this would be a situation where it makes sense for an oligopoly to form. Okay, so remember that economies of scale, this is a situation where you can increase the quantity, right? You're going to produce more, you're gonna increase the quantity you're producing and by increasing the quantity, your average total costs are gonna decrease. So your average total cost per unit is less by producing more units. Right? These are the economies of scale, you're taking advantage of specialization in your workers or getting quantity discounts by buying in bulk, things like that. Economies of scale. Okay. So what we see on the graph here in green, I've got the long run average total cost of perfect competition and notice how quickly it reaches its minimum efficient scale, Right, minimum efficient scale, is that minimum point where those economies of scale exhausted are exhausted? Right? So you can tell on this whole portion, the cost is decreasing as they increase quantity, right? We're going to the right and costs are going down so that's economies of scale. But we reach the end of those economies of scale pretty quickly. Right? Look at the demand, how far out it is? Let's pretend that's way, way, way over there. And this is just a very small portion right here. They can only satisfy a very low quantity, right? They're only gonna produce a low quantity. So that's why in perfect competition, it makes sense for there to be so many suppliers, right? Because they each make such a small little quantity to fulfill this demand. That's much, much grander. Right? So that would make sense for a long run average total cost curve in perfect competition. But in an oligopoly, look at this yellow curve, look how much more economies of scale they get right notice how this curve keeps going for a long time to a very low average total cost right there, getting tons and tons of economies of scale, but they still can't supply that demand. Right? The demand is still further to the right, at this minimum average total cost here, they still can't supply um the whole amount for demand. Right? So this would say some high quantity compared to the low quantity of perfect competition. So you could imagine if there were, say two firms in this market, each one supplying this quantity right here, right? The first one supplying this much quantity and the second one could supply the same amount. Right? If they're the same size, something like that, The two of them could get us out to our demand curve. Right? So with two companies here we can naturally fill up the demand. Right? So this could be the situation you might call this a natural duopoly. Duopoly is a type a type of oligopoly where we have to write there's a duo and this is a situation where it's a natural duopoly because the economies of scale make it make sense for this market for just two producers to produce it. Right? If we had a bunch of smaller companies produce it well, they wouldn't reach their minimum efficient scale, right? They would be producing at some higher cost and that would be less efficient. Alright, So it just makes more sense for there to be less companies when we have a situation like this where there's lots of economies of scale. Okay, So when we dive into the rest of this chapter, we're gonna be focusing a lot on these duopoly. Alright. We're gonna for the most part while we deal with oligopolies, just talk about a situation where there's two firms. Okay. Because it's the simplest case and we can get a lot of information out of that. All right, so this is our barriers to entry. Let's go ahead and move on to the next video