Oligopoly and Innovation an Oligopoly Essay

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Common good

One of the important characteristic of oligopoly is the interdependence of one firm on the others. When faced with touch economic problems or government regulations, the only way for the industry to survive is by innovation. When one firm innovates, it benefits the other firms in the industry in a big way and this can lead to co-operations and mergers. In most cases, consumers benefit a lot from innovation in terms of the products and services they enjoy and this is likely to bring more business and profits to the industry as a whole. This is why other firms may be willing to lend resources to benefit the common good. When one company innovates, it benefits the industry as a whole and this can act as a booster to the other firms as well. An example is the five banks that rule the UK banking industry. When they were faced with a financial crisis, the banks were forced to innovate and come up with better products. This is yet another reason why oligopolistic firms are more likely to innovate than firms operating in any other form of market.

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A firm operating in an oligopoly market has all the resources and technology it needs to innovate. A good case in point is the U.S. cellular industry that is dominated by AT&T, Verizon, Sprint, U.S. Cellular and T-Mobile. They had the resources to look for higher speeds for customers and the end result of this innovation is the 4G speeds for internet access. These vast amount of resources give these firms the confidence to spend money on innovation.

In short, an oligopolistic firm has the most incentives to innovate when compared to other firms. Their vast resources, interdependence on other firms and competition are some of the reasons for them to come up with unique products or better marketing techniques that will benefit the firm, industry, consumers and the economy at large. Though these firms are the price setters rather than the price takers, the consumer can enjoy a better service or product due to the innovation of an oligopolistic firm and this is sure to benefit everyone involved......

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