Question

Identify the number of fims present, the type of product, and the appropriate market model in the following scenario.

In a small town, there are four providers of broadband Internet access: a cable company the phone company, and two satellite companies. The Internet access offered by all four providers is of the same speed. Almost everyone in the city already has broadband, so any potential new company would have to engage in a price war with the existing companies and would be unlikely to cover its costs for years, if ever.

Answer 1

No of Firms Present - 4 firms / few firms

Type of Product - Standadized Product

All the companies are offering a standadized product of broadband Internet access of the same speed.

Appropriate Market Model - Oligopoly

An Oligopoly is a concentrated market structure where a few firms dominate the market and offer the same products. Gaining entrance into this type of market is considered hard as the existing firms are already very entrenched and dislodging them will require a huge cash outlay. The Broadband internet market in this town is therefore an Oligopoly.