Question

How to respond this message: "Imperfect competitive companies sell different products and services, set their own individual prices, fight for market share, and are often protected by barriers to entry and exit. The airline business is an example of an imperfectly competitive industry in the economy. They have high barriers to entry due to the extremely high cost of aircrafts. There are very few companies that dominate the game which makes it is an oligopoly. When a firm decides to raise prices, each other one will try and run more deals or offer more miles to people that purchase tickets. They also may offer free checked bags in order to convince you to pay for expensive ticket."

Answer 1

An oligopolistic market structure features a small number of dominating firms with high barriers to entry, where firms can either collude like a monopoly or compete for market share through strategies other than price.

Step-by-step explanation:

The concept being described pertains to an oligopolistic market structure, which is a type of imperfect competition. Companies in an oligopoly have significant control over the market and tend to compete less on price and more on product differentiation, marketing, and other areas. One of the key features of an oligopoly is the high barriers to entry, which often take the form of substantial capital requirements or control over critical resources. As an example, the commercial aircraft industry—dominated by Boeing and Airbus—is often cited. These two companies nearly split the global market for large commercial aircraft, making it a classic oligopolistic industry.

Firms in an oligopoly face two main strategic choices; they can collude tacitly or explicitly to act like a monopoly and maximize joint profits, or they can compete against one another. This competition could involve expanding output or reducing prices to attract more customers, despite reducing potential profits. Additionally, such markets can take on elements of both monopolistic competitive industries, where differentiated products play a significant role, and perfect competition, where they may compete more directly on price.