NAME- SHRESTH SINGHANIA

CLASS- 12C

ROLL NUMBER- 27

REGISTRATION NUMBER-
11989
ISC ECONOMICS
PROJECT

OLIGOPOLY MARKET
FORM IN INDIA
 INTRODUCTION
A market is a system wherein the buyers and sellers of a commodity come in
contact and communicate with each other and strike a deal about the price and
quantity to be bought or sold. It does not necessarily mean a physical presence like
we understand in the use of common language. A market has many forms and they
are all differentiated by a variety of factors. These factors may include:

1. Number of buyers and sellers

2. Nature of the product or commodity
3. Knowledge about the product
4. Entry and exit barriers
5. Degree of price influence

There are five major forms of market which differ from one another on the factors
stated above. The different forms of market can be stated as:

1. PERFECT COMPETITION:

Perfect competition is a market structure in which there are a large number

of sellers selling homogenous products (perfect substitutes) to a large
number of buyers at the same price. Any individual firm cannot influence
the price of the commodity and is merely a price-taker. There are no barriers
to entry and exit in this market form and all firms earn only normal profits in
the long run.

The market has perfect knowledge in this market form meaning each buyer
and seller is aware of the market price and is not ready to pay a price higher
than the prevailing market rate. The sellers also have perfect knowledge
about production techniques and therefore have the best available production
techniques.
 Perfect competition

There is also an absence of transport costs that lead to the same cost for
sellers and uniform prices for buyers. There is no example of a perfect
competition market and is a theoretical but ideal market form.

2. MONOPOLY:
A monopoly is a market form where there is only one seller who sells a
product having no close substitutes to a large number of buyers. There is no
perfect or a close substitute to the commodity that a monopolist is selling.
There are barriers to entry in a monopoly that could be because of
Government rules and regulations, patents, copy rights, economies of scale,
etc.
A monopolist is a price-maker as he has complete control of the supply of
the commodity. This can be done by him as there are no other competitors
influencing the supply and also no close substitutes to his product. He may
follow the policy of price discrimination which means selling the same
commodities at different prices to different buyers. It is a market form that
exists in the real world and some examples of it could be the Indian railways
and CESC.
 CESC is a monopoly in power distribution in Kolkata

3. MONOPOLISTIC COMPETION- It is a market form that has a large

number of sellers who sell differentiated products which are close substitutes
to a large number of buyers. It has no barriers to entry and exit and has
differentiated products. The different sellers may be using different brand
names that differentiate their products from one another. There is non-price
competition among the different sellers and the price of one seller does not
affect the others. There is the presence and importance of selling costs and
advertising in this market form. Most consumer goods like soaps, pens,
biscuits, shoes, etc are examples of products originating from monopolistic
competition.

Biscuits fall under monopolistic competition in India

4. MONOPSONY- A monopsony is a market form where there are many
sellers and only one buyer who buys the products. The product that is
manufactured or produced by the sellers is a specialised product or input
which has utility only for that buyer. The buyer has the power of being the
price-maker in a monopsony. If there is a lack of mobility of resources like
in labour markets, then a monopsony may exist locally. In India the
government is the only buyer of fighter aircrafts and heavy weapons from
both national and international sellers.

Fighter planes can only be brought by the Government and classify

under a monopsony

5. OLIGOPOLY- An oligopoly is a form of market structure that has a few

sellers selling homogenous or differentiated products to a large number of
buyers in a way that there is intense competition among them. There are
many features to identify an oligopoly market form and they are as follows:
 FEW SELLERS- An oligopoly market has very few sellers and they
dominate the industry. These few sellers cater to a large number of buyers in
the market.
 INTENSE COMPETITION- There exists intense competition among the
firms in an oligopoly market and each firm aims to capture the customers
and buyers of its competitors to gain greater power to influence the market.
 The action of one seller will definitely affect the sales and market share of
other sellers which therefore leads to intense competition in this market.
Each firm is always preparing an appropriate strategy to deal with rival
firms.
 INTERDEPENDENCE- All the firms in an oligopoly market are
interdependent while taking decisions about their own price and production.
Any action by a particular firm shall lead to a reaction by its rival firms as
well and vice versa. They also often indulge in intense price competition
meaning if one firm lowers its price then the other may reduce its price even
further than this firm and this process carries on. This price war is very
common in oligopoly markets.
 NATURE OF THE PRODUCT- The product produced by oligopoly firms
may be either homogenous (perfect substitutes) or differentiated (but close
substitutes). We therefore have two kinds of oligopolies which include:
1) Pure Oligopoly
2) Oligopoly with Product Differentiation.

Definition of an oligopoly

 IMPORTANCE OF SELLING COSTS- Advertising and selling costs are

essential in an oligopoly because of the cut-throat competition in this
 market. The firms advertise their products as well as carry out door-to-door
campaigns, give discounts, cut prices, etc. These measures may put a firm at
advantage and timely advertisements may save the firm‟s position in the
market. It may become a matter of life and death of the firm.
 BARRIER TO ENTRY - In an oligopoly market form, there exist very
high barriers of entry that do not allow the entry of new firms into the
industry. There are many factors that lead to such barriers and they include
economies of large scale production, cost advantage of existing firms, price
cutting, control over important inputs, patent rights, etc. In the longer run,
newer firms may find ways to overcome such barriers and succeed in change
of the market form. Therefore barriers to entry are the key for existence of
an oligopoly market.
 INDETERMINANT DEMAND CURVE OF AN OLIGOPOLIST- The
demand curve of an oligopolist cannot be determined because he is unaware
of how his rivals shall react to his move of lowering the price. A firm is very
dependent on the action and reactions of its rivals. Hence any move by the
rivals should have a reaction accordingly. Any change in price by rivals shall
have an effect on the price of the oligopolist‟s firm. Hence the demand curve
cannot be determined at any given point.

Differences between monopolistic competition and oligopoly in a table

Now, let us study some differences between two seemingly similar market forms,
oligopoly and monopolistic competition:

1. NUMBER OF SELLERS: In a monopolistic competition form of market

there exist a fairly large number of sellers and a large number of buyers.
However, in an Oligopolistic form of market there exist only a few sellers
who cater to the demand of a large number of buyers.

2. NATURE OF PRODUCTS: In monopolistic competition, all the sellers

sell differentiated products meaning no product is exactly the same or a
perfect substitute of the other. However in an oligopoly we may note that the
commodities supplied by the different firms may be homogeneous or
differentiated. This means that the firms in an oligopoly may be selling
products that are perfect substitutes of each other or they may be
differentiated. This shows us that the nature of both vary in both market
forms. In a monopolistic competition, firms may be selling products like
toothpaste while in an oligopoly firms may be providing telecom and data
services which may be called perfect substitutes (they are not exactly perfect
substitutes due to factors like brand and after sales service however they are
very close substitutes).

3. BARRIERS TO ENTRY: There are is free entry and exit in a

monopolistic competition market form. This means that there exist no
barriers to entry in this form of market. The firms in the market can exit
whenever they like and new firm can enter as per their choice. However in
an oligopoly, there are many barriers to entry meaning new firms may not
enter the industry very easily because of certain restrictions posed by the
other firms. In an oligopoly, factors like intense competition, price
advantage, existing position of firms, etc may restrict entry in this market
form.

4. MARKET POWER: In a monopolistic competition each player does not

hold any significant power to influence market prices. This is because there
are a large number of player who sell differentiated products and thereby
they cannot completely influence the market. In an oligopoly, since there are
 only a few players, a firm holds significant power and position in the
market which may be due to existence of a few players and the nature of
products.

5. SLOPE OF DEMAND CURVE: A demand curve is negatively sloped

but more elastic than a monopoly in a monopolistic competition form of
market. In an oligopoly, the market demand curve cannot be determined
due to the significant role of the rivals in the decision-making. There is an
indeterminate demand curve in an oligopoly. Therefore there is a difference
in the demand curves of monopolistic competition and oligopoly market
forms.

6. NATURE OF PROFITS IN THE LONG RUN: There are normal profits

in the long run in a monopolistic competition due to free entry and exit in
the market. There can be abnormal or supernormal profits in the long run
in an oligopoly market due to barriers to entry in the market.
 CASE STUDY
There are many industries in our which can be classified as oligopolies. Some of
these industries include automobile, steel, oil refining, telecommunications,
grocery delivery and etc.
Let us identify the various features of an industry that make it an oligopoly with
the help of examples. We shall be taking the examples of two industries that are
oligopolies and identifying their features:

1.TELECOMMUNICATION INDUSTRY
In India the telecommunication industry refers to the industry that provides internet
and data services along with phone calling and SMS facilities. It is an industry that
caters to a majority of the population on a daily basis. Calling and internet have
become necessities in the life of most people nowadays. The industry has just seen
the auction for the 5G spectrum and the testing and procedure for rollout has
started.

Telecommunication towers
The industry is essential for communication and has replaced other forms of
communication like letters. It has eliminated the need of people travelling
everywhere to do their work. It is absolutely essential for the Information
Technology industry in India and internet services are being demanded more and
more every passing day. The internet has taken the center stage in many other
industries and without it; they may face a lot of difficulty in operating. In India, the
industry is the perfect example of an oligopoly. Some distinct features of the
industry that make it an oligopoly are:

1. Few Sellers: In India, the telecom industry has only a few major players
which can be named as Reliance Jio, Bharti Airtel, Vodafone Idea and
BSNL. The industry has only these major players and they dominate the
market. These few firms are the providers of telecom service in our nation.
Besides BSNL, all three players are private ones.

The firms in the telecom industry

2. Many buyers: India is the second largest market for the telecom industry in
the world in terms of subscriber base. India has 120 crore subscribers to
telecom services. These buyers demand services which are provided by only
a few sellers which are mentioned above.
3. Nature of product: The different sellers provide homogenous products in
terms of use; however the after sales service and network connectivity may
vary from area to area. The service may be differentiated on the basis of the
connectivity that the consumer receives from the network tower. There may
 be different internet speeds provided by different sellers that vary on the
basis of the spectrum purchased by the firm in the auction that is held by the
Government. If we assume an ideal situation then we may broadly say that
the services are homogenous however in the real sense, it varies on the basis
of the previously mentioned factors.

4. Barriers to entry: The telecom industry has a very high barrier to entry.
The entry into the industry requires a firm to procure licenses and also the
internet spectrums. It requires huge initial capital investment which cannot
be provided by small and medium sized firms and entrepreneurs. The huge
initial competition plus the cut throat competition in the sector do not
encourage new players to enter the market very easily. The different firms in
the industry have to take on large debts to pay their auction dues to the
Government which has led to bad financial position of these enterprises.
Vodafone and Idea were two separate entities in the telecom industry;
however due decreasing market share and bad financial health of the two
companies, they decided to have a merger. Even after the merger, the
company has been facing huge losses of around 7000cr every quarter. Even
then the firm has not been able to clear its dues to the Government. The
company has now decided to give approximately 30 percent of equity in the
company to the company as compensation of dues.

Past and current telecom companies

 Such situations do not encourage newer players to enter a highly capital
intensive and competitive market wherein established players like Bharti
Airtel and Jio (owned by the behemoth Reliance Industries Limited) already
dominate the market. The position of players like BSNL and Vodafone Idea
(VI) discourages newer players to enter the market. Firms like Tata Docomo,
Uninor and Aircel have all failed in the industry. Thus this discourages any
new entry into the sector.

5. Intense competition: The telecom industry has intense competition and the
main competitors include Reliance Jio and Airtel while Vodafone Idea
places third and BSNL fourth. VI and BSNL are laggards in the industry and
Jio is the market leader with the highest number of subscribers. Airtel places
at the second position. The other firms in the industry have been merged
with the existing firm or have gone bankrupt due to high debts, inadequate
profits to meet interest payments and various other factors. VI and BSNL are
struggling in the industry and firms like Aircel, Reliance Communications,
Tata Docomo, Uninor, etc. have either gone bankrupt, acquired by existing
firms or shut down. When Jio was launched by Reliance, it provided free
services to the citizens of the country and gained a huge subscriber base that
led to huge pressure on firms like Airtel, Vodafone and Idea (Vodafone and
Idea had not merged then). These firms faced a lot of pressure due to the
entry of Jio in the market.

Pie chart showing the market share of various firms

6. Interdependence: In the highly competitive telecom industry, the firms are
all interdependent on the actions that are taken by others. This is the reason
that many price wars take place in oligopolies. The telecom industry was
heavily impacted by the entry of Jio in the market which was providing free
internet and calling facilities to the citizens. This led to huge losses being
borne by existing players who had to lose a very large number of
subscribers. These services affected the whole industry and disrupted it. This
method was followed by Jio to gain subscribers in the already competitive
industry and gave it a stellar entry into the market. This was possible
because of the huge resources that were provided by it from its parent
company, Reliance Industries Limited. This led to a price war between other
companies which could not provide such services for free. The other players
reduced their prices drastically to match with the competition. This has led
to really cheap internet in our country with one gigabyte of data costing only
26 cents with is the cheapest in the world. The pricing policy of all the firms
is interrelated to one another.

Shah Rukh Khan in a Jio advertisement

7. Selling costs: There are huge selling costs that are incurred by these firms
that help them compete in the market. The firms like Jio and Airtel run many
advertisements in the form of hoardings, radio announcements, television
clips and others with brand ambassadors and celebrities endorsing the firms.
Jio had famously sponsored almost all the IPL franchises to market their
service. It had also hired Shah Rukh Khan to be its brand ambassador at the
time of its launch. Airtel has also done advertisements that show the viewer
the extreme places where it can provide network connectivity.
 2. INSTANT ONLINE GROCERY
DELIVERY INDUSTRY

The instant online grocery delivery industry is relatively newer than other
industries. The industry provides services of grocery delivery from online orders in
a very short period (as in a maximum of 30 minutes of placing the order). The
industry has emerged in the recent years and delivers groceries to people without
them having to even step out of their houses and that too at a nominal cost and in a
negligible timeframe. The industry has many features that may compel one to call
it an oligopoly. The different firms collectively show various characteristics that
make it an oligopoly. The industry is rapidly growing as more and more
households realize the utility of the service it provides.

Some features that confirm the industry as an oligopoly may be recognized as

follows:

1. Few sellers: There are a very limited number of firms that provide such
services. The major firms that are present in the industry providing such
services include Blinkit (backed by Zomato), Zepto, Instamart (backed by
Swiggy), Big Basket (owned by Tata) and Dunzo (backed by Reliance).

The various firms in the online instant grocery delivery industry

2. Many buyers: There are many buyers who are catered to by these sellers.
The people living in the cities use this service much more than people in the
towns and villages. There are approximately 2 million people who buy
online groceries. The different firms cater to the need of these people. The
number of buyers is also expected to increase in the future rapidly. The
industry is project to grow at a mind boggling CAGR of 68%.

3. Nature of product: The different firms provide majorly the same service,
however the time intervals at which the service is provided by the different
firms may vary. Firms like Zepto deliver the groceries in 10 minutes while
Big Basket may delivery in around 15 to 30 minutes. The after sales service
like the customer help may vary from firm to firm, however essentially apart
from this, the service may be called homogenous. The service, if taking into
account these other factors, then may be called differentiated. Talking from a
casual perspective, they may be called homogenous.

The time taken for delivery by different firms

4. Barriers to entry: There are numerous factors that act as a barrier to entry
in the industry. The various factors that act as barrier or discourage the entry
of new players can be identified by us. The industry is dominated by these
few firms who have intense competition and a large market share. These
firms are established and are backed by companies that have experience in
the delivery business or are owned by large industrial houses like the
Ambani‟s and the Tata‟s. The lack of clarity of the way to profitability of
these firms is one of the biggest hurdles that newer firms face. This
discourages them to enter the already competitive market. The user interface
and management of such an online business also requires capital,
connections and experience in the delivery experience. The firms which are
backed by Zomato and Swiggy have the experience with them that is
required in a delivery business. The other firms backed by Tata and Reliance
have experienced and seasoned management which has sound business
knowledge. These factors poise a serious challenge to any new competitor
who shall be willing to enter the market.

The online grocery delivery market share of various firms

5. Intense competition: The industry has many established players and newer
players backed by Ola, Flipkart and Amazon is trying to enter the market.
The existing firms in the industry are having a competition to gain higher
market share. The different enterprises have taken many measures that have
 led to intense competition in the industry. No particular firm has been
decisively been able to succeed in the industry while being profitable. Zepto
which has been a prominent player in the market has faced a loss of 390
crore in the only the first year of its operations. The competition is intense in
the delivery space as a whole. The various firms having different resources
can get ahead of the others in different fields.

6. Interdependence: The firms in this industry have not neglected the actions
of the others as it is a very competitive industry. The pricing, service,
advertising and all other factors are carried keeping in mind the plans and
strategies of all the other firms. The firms cannot afford to neglect changes
in policies and plans of other competitors. The firms have to react on the
actions taken by competing firms. Without any major action, they shall fall
behind and lose out market share thereby getting eliminated from the
competition.

Advertisement by Dunzo

7. Selling costs: The various firms incur heavy selling costs as they run
television advertisements, social media handles, hoardings, newspaper
advertisements and other forms of attractive marketing and selling. The
firms display the utility of their product and the minimal cost that the
consumer needs to pay for availing their service. This helps in retaining as
well as gaining market share in the competitive market. The firms also take
up brand ambassadors to promote their brand and make it more popular. The
brand image of the firm plays a very important role in the sales and
operations of the business.
 EVALUATION
Oligopolies are almost the same as organized alliances, an organization of multiple
firms and/or companies that come together to rule a particular market, dividing the
profits amongst each other while not allowing any other firm and/or company to
enter the market and fairly compete. However, as the world advances into a much
more “modern” and “advanced” generation, there has been an emerging pattern of
oligopolies dominating the Indian as well as world markets.

The OPEC logo

However, while this pattern has become emergent in the markets, so has been the
rising wave of opposition to them. Giving a rather prevalent example, the
Organization of Petroleum Exporting Countries (OPEC) has for years, been the
oligopoly in the world oil markets, combining the oil production power of the
Middle East with other important oil producing countries like the United States of
America, the Russian Federation and Mexico. Despite the economic brunt being
borne by people across the globe due to high oil prices, the OPEC has stuck to their
decided production quotas. In 2020, when the Russian Federation decided to boost
oil production to increase its dominance in the oil markets, OPEC countries
mobilized in a price war against the Russians, until a deal was signed when oil
prices were at record lows due to the OPEC-Russia Price War.

The main aim of the oligopoly market is to secure for the producers agreed upon
profits without the risk of an external competitor harming their dominance in the
markets. Several sectors of the Indian economy are now being dominated by
oligopolies. The cold-drinks sector of India is primarily dominated by Varun
Beverages which has notable brands like Miranda and Mountain Dew, Orient
Beverages Ltd which developed products like Thumbs Up and Limca, Red Bull
India Pvt Ltd which developed the Red Bull energy drink, PepsiCo and Coca Cola
India. They make products which are almost the same: Cold drinks involving the
use of soda as a prime component. What makes them heterogeneous as well is the
fact that they differ in flavour and have different branding.

Varun Beverages Limited logo

While big firms continue to hold control of important resources and yearn to earn
profits while facing no potential competition and thus group together with one
another to push forward a collective organized efforts to dominate the economy, be
it in the automobile sector (dominated by Maruti Suzuki, Hyundai, Tata Motors,
Mahindra in India) or the online groceries delivery market (dominated by Zepto,
Big Basket and Blinkit in India), there will continue to exist an oligopoly. The
barriers to entry, established firms, economic advantage, rules and regulations and
some other factors may ensure that oligopolies shall be the market form in the
future as well.
 CONCLUSION
Ultimately, despite the various pros and cons of this system, it is the oligopolistic
market system that will ultimately dominate the global economy. Even if we look
at the example of the Organization of Petroleum Exporting Countries (OPEC),
despite its continued setting of moderate production quotas aimed at keeping oil
prices high, the resistance to it is not enough to replace it and OPEC continues to
be the major and dominant oil supplier in the global markets.

At the end, it all depends on the consumers. Oligopolies primarily operate on

mechanisms designed to gain control of all the raw materials while also forming
legal or other barriers aimed at preventing the entry of other potential players in the
market. As a result, consumers depend mostly on these organized groups of
producers, thus allowing these oligopolies to survive.

Oligopolies do help stabilize prices and with a significant reduction of competition,

firms in an oligopoly will be able to shift a good portion of their funds from
wasteful expenditure in advertisements towards constructive expenditure in
Research and Development (R&D). This will ultimately result in advanced
methods of production and new and technologically developed products that help
provide wider and better quality choices to consumers.

American business consultant Gerald Celente once said that “Free-market

capitalism, in the blink of an eye, was gutted and replaced by an oligopoly” and
today, the oligopolistic system has truly gained prominence of a truly enormous
scale.
 ACKNOWLEDGEMENTS
I am overwhelmed in all humbleness and gratefulness to acknowledge my depth to
all those who have helped me to put these ideas, well above the level of simplicity
and into something concrete.

I would like to express my special thanks of gratitude to my teacher, Mrs.

Maitreyee Sircar as well as our principal who gave me the golden opportunity to
do this wonderful project on the topic „Oligopoly in India‟, which also helped me
in doing a lot of research and I came to know about so many new things. I am
really thankful to them.
Any attempt at any level cannot be satisfactorily completed without the support
and guidance of my parents and friends.

I would like to thank my parents who helped me a lot in gathering different

information, collecting data and guiding me from time to time in making this
project, despite of their busy schedules, they gave me different ideas in making this
project unique.
 BIBLIOGRAPHY &
WEBLIOGRAPHY
BIBLIOGRAPHY:

1. Frank ISC Economic for Class 12 by DK Sethi and U Andrews

WEBLIOGRAPHY:

1. www.wikipedia.org
2. www.economicsdiscussion.net
3. www.britannica.com