Chapter 17 Reflections- Oligopoly

"This chapter and blog post wraps up this module with the last type of market - oligopoly.  Oligopoly is a great word to use in casual conversation, so pay attention to this chapter.  The next time someone talks about how nice it would have been if AT&T had bought TMobile you can say "I agree!  The phone industry would still have been an oligopoly, there was no risk of creating a monopoly."  Of course a few people will wonder if you have perhaps started drinking, but most people will be really impressed." --Lisa Cheney-Steen

My thoughts about anti-trust laws with respect to the cell phone industry...

I absolutely think that anti-trust laws are necessary in regards to the cell phone industry. One wireless/broadband company should not be able to dominate the playing field. Good healthy competition between carriers is best for everyone, especially the consumer. Not only does it keep the prices competitive but one company should not be able to control the "airwaves." If AT & T (or whichever cellular service provider) were allowed to monopolize the market not as many people would be a part of the market. It would be bad for everyone.

Do I think the cell phone industry could be an oligopoly? Why/Why Not?

First, let's explain what an oligopoly is. This market is one in which there are only a few sellers who offer similar or identical products. I don't know if I would categorize the cell phone industry as being an oligopoly. If I am thinking of cell phone manufacturers there are quite a few: Sony Ericsson, Nokia, LG, Motorola, Sanyo, Samsung, Audiovox, Kyocera, Apple, HTC just to name a few.

If we are talking about cell phone service I would maybe consider this as having oligopolistic characteristics. T-Mobile, Sprint, AT &T, Verizon are the ones that come to mind. There are fewer cell phone service providers than there are manufacturers of the cell phones for sure. This is a highly competitive market and it is hard to break into this industry.

Explain how a decision box works: 

The book used the example of Bonnie and Clyde who had been caught and taken into custody after just having robbed a bank. They are each taken into separate interrogation rooms. They each have two options: Confess or stay quiet.

If Clyde and Bonnie confess: They each get 8 years in jail.
If Clyde confesses and Bonnie does not: Clyde goes free.
If Clyde and Bonnie stay quiet: They each get 1 year in jail.
If Clyde remains silent but Bonnie confesses: Clyde gets 20 years in prison.

 Since neither knows what the other is going to do each person has to do what they think is right. The example in the book says that they each end up confessing, getting 8 years in prison. If they had each just stayed quiet, they would have only gotten 1 year. These are the decisions that we have to make all the time, not necessarily to this level of losing actual freedom but on a much smaller scale.

What about oligopolies is most unclear to me?

The only thing I wonder about oligopolies is how do those few firms remain competitive? Everyone is selling the same product for about the same price. I guess this is where marketing of said product comes in to the picture. The firm is trying to sell a product that is virtually the same as its competition but has to differentiate itself as superior.