Oligopoly in Telecom sector in

India

Existence of sticky prices under oligopoly : a real life analysis

Aditya Kashyap

Roll no. 16183

Group no. - IX

Oligopoly

OLIGO + POLY = OLIGOPOLY

OLIGOS: A FEW

POLEIN : SELLERS

A market form dominated by a few big firms

competing with each other, is an oligopoly.

Oligopoly in Telecom Sector

No. of firms : very few (less than 10)

Product differentiation :

• Differentiated in terms of connectivity

• Similar in all other features

Price makers

Free entry and exit of firms : Restricted

Imperfect knowledge : cost & quality

Interdependence of firms for Pricing policy

Postcard or Phone call

Chotta Recharge

Non-stop Mobile

Simply Reliance

Pay Per Second

Daily Telephone Allowances

Reliance JIO

Mobile schemes : A change in scenario

Implications of Price War on Consumers

Short Run :

• Firms lower prices - consumers get a better deal

• Increase in market size

Long Run :

• Quality of services is more important

• Fierce competition-fewer firms left in the market-

have better price control

Implications of Price War on Producers

Short Run :

• Negative impact on firms- lower prices- lower revenue-

more focus on marketing

• Some firms use Economies of Scale to combat the

situation- others ( Videocon, Telenor, etc.) suffer

Long Run :

• Firms try to reduce cost – innovations and production

efficiency

• Small firms forced to exit market– fewer firms left in the

market – better price control

CONCLUSION

Consequences of price war :

Innovation and increase in product

efficiency

Exit of smaller firms

Domination of larger firms in the

Market

Remaining firms enjoy greater profit

margins