What are some similarities and differences between monopolies and oligopolies?

Question

What are some similarities and differences between monopolies and oligopolies? How would you classify Microsoft? How would you classify the power industry in California? Explain your reasoning.

Answer 1

Monopolies and oligopolies both exert significant influence over the market. The main difference between the two are that in a monopoly, there is one provider, whereas in an oligopoly, there are several, but not too many.

I would classify Microsoft as an oligopoly that wants to become a monopoly. Right now, there are other competitors, although these competitors are generally much smaller and thus are less equipped to take on the Microsoft corporation. The power industry in California, on the other hand, is more of a monopoly, since there is little choice about how to get power. Utilities are generally monopolies, often called natural monopolies, because it is often more efficient than competition in those particular industries. For example, having every power company stringing lines in California would mean massive amounts of lines, and each company would get only a portion of the business, causing all of them to see losses. Thus, having one provider generally is more efficient.

Answer 2

a monopoly is one company or organization having control over the production of a particular product/industry, with a barrier to entry being so high that no other competitor can enter the market to compete.
An oligopoly is the same thing, except there are a few companies orr organizations, that collude to fix the price of the goods at issue.
the result is the same in both, the price of the goods is competelt inellastic, its a straight line on a graph instead of a curved line like in a normal supply/deman graph. Practically what this means is that to sell more of the product, the producers (whether an oligopoly or a monopoly) must reduce the price. Price is the only thing that will move the product, and only the monopolist/oligopoly can change the price. (rather then the market demand).
Microsoft was classified as a monopoly in the past, however this is arguably not true anymore. Microsoft used to "control" the desktop computer platform, by using the wide use of its OS to sell Word, Excel and IE. today however, Microsoft is facing competition from Google and other companies that offer competing products. Google for example offers spreadsheet application for FREE. Ultimately, I think Microsoft is no longer a monopoly, however it does remain the biggest distributor of OS. the power industry in CA is more akin to an oligopoly because the energy market is what is often called a natural monopoly. Anotherwords the high cost of entry and the difficulty in creating infrastructure means only a few companies can compete. it is also an industry subject to intensive regulation. In CA there are only a handfull of companies that produce electricity on a major scale, and their prices are in effect heavily regulated by the state government. If you had to classify them, they would fall along the line of an oligopoly, however their pricefixing has more to do with regulation then collusion.

PS if this answer is for an economic professor, just say MS is a monopoly and the power industry is an oligopoly because most college professors are so outdated in terms of their knowledge base that they have probably been using the same examples for 30 years, and are simply recycling them again without checking up on the facts on the ground (so to speak).