Market Structures in Australia: Monopolies, Duopolies, and Oligopolies

This report examines the market structures of monopolies, duopolies, and oligopolies in Australia. It discusses the prevalence of monopolies in sectors like telecommunications (Telstra) and the financial sector, as well as oligopolies in supermarkets and the banking industry. The report explores the changing landscape due to the Australian Competition and Consumer Commission (ACCC) and the potential shift in the telecommunications industry with the National Broadband Network (NBN). It analyzes the dynamics of competition, market concentration, and the impact of new entrants. The analysis covers economic theories, the features of each market structure, and examples like Woolworths and Coles in the duopoly market. The report concludes with recommendations for regulatory adjustments to foster competition and reduce the dominance of single players in the market, advocating for policies that encourage new entrants and a more competitive environment.

Running head: MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
Monopolies, Duopolies and Oligopolies in Australia
Name of the Student
Name of the University
Author note

1MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
Table of Contents
Introduction......................................................................................................................................2
Summary of the Story......................................................................................................................2
Economic theories and concept.......................................................................................................3
Monopoly in Australia.................................................................................................................3
Oligopoly.....................................................................................................................................4
Duopoly.......................................................................................................................................5
Recommendation.............................................................................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................7

2MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
Introduction
Monopoly, duopoly and oligopolies all are common form of markets exits in an
economy. Monopoly is considered as the broadest games among these three forms. There are
long policy debate regarding the existence of perfect competition and absence of it in the pure
form. Presence of innumerable number of buyers and seller, selling identical products is a myth
and so is the concept of perfect competition. Monopoly structure is found to exist when single
sellers sells some unique product. In Australia market concentration is observed in
supermarkets, in the financial sector concentration is among the four major banks and one
monopolist Telstra in telecommunication industry.
Summary of the Story
The large players in the market easily attract investments and investors are always eager
to in these sectors because of huge possible returns. Often regulators and government support
their expansion to boost economic growth. However, now the opportunities for big business are
fading because of a change in focus of the Australian Competition and Consumer Commission
(ACCC) that now become more aware of about the behavior of large player toward other
suppliers and consumers. This weakens some oligopoly structure in the Australia. On the other
hand, a possible break down of quasi monopoly structure of Telstra in telecommunication is
realized. Once entry barriers controlled by National Broadband Network (NBN) are relaxed, the
industry will have four other big players as suggested from the market research by Morgan
Stanley (smh.com.au 2017). The removal of monopoly structure will attract new service
providers to the broadband industry reducing prospect returns of Telstra in the business. The
statistics revealed by Stanley shows new service providers entering in the business need 100,000

3MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
subscribers to reach to the break-even point. In order to earn satisfactory level of profit needed
subscribers are 200,000 (abc.net.au 2017). This is quite large number for a new entrant to
achieve. In the telecom industry it s believed that four player – Telstra, TPG, Optus and Vocus
have considerable competitive advantages.
Since 2000, Consolidation has already begun in the industry. A major share of profit
(80%) was previously enjoyed by Telstra and only 20% was left for three others and existing
small providers. The ratio now becomes 60% for Telstra (Barry 2017). Vodafone Hutchison
though is a large player in the mobile industry; it does not exist in the broadband service.
Driving factor for decline in the number of competitors is the huge rapid expansion of TPG and
Vocus acquiring a larger share in the industry. In the telecom industry a series of takeover is
experienced with M2, iprimus, Dodo, Engin and some other joined with Vocus. With this, the
market share of Vocus increased to 8 percent and that for TPG is 27 percent (Nabin et al. 2017).
Economic theories and concept
Monopoly in Australia
Any market dominated by a single seller is considered as a monopoly market. In such a
market structure sellers have exclusive control over price and quantity. The monopolist can set
price such a high level that he can grab the entire consumer surplus alone. Some distinct features
of monopoly market include the product sold in the monopoly market generally lacks any
substitutes. There are barriers preventing any new entry in the market. As the product does not
have any substitutes neither allows entry of few firms, the monopolists do not have any close
competitors (Tyers 2015). Hence, the monopolist is the price maker in the maker in the market.

4MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
There are some markets where one seller enjoy some natural advantages such strategic
advantage, control over some mineral resources and others.
Figure 1: Monopoly market and economic profit
(Source: As created by Author)
In a market, when share of any one firm is too much the market is also considered as an
example of monopoly market. Telecommunication industry in Australia largely dominated b
Telstra. The industry also prevents entry of some potential competitors such as Optus, Vocus and
TPG (Hazledine 2017). The structure is now changing with the potentiality of becoming a
oligopoly and duopoly.
Oligopoly
Oligopoly is concentrated form of market. However, the concentration is less than the
monopoly. There are few large players having a significantly large share. Strategic
interdependence is a feature of oligopolistic market share. The examples of oligopoly markets in

5MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
Australia are petrol retailers, in the finance industry banks are well known examples of
maintaining an oligopoly market structure. In the Supermarkets, there are also oligopoly players
(Baumol and Blinder 2015).
Duopoly
In the duopoly market, there is competition between two large players. Duopoly is a
reduced form of oligopoly market. Here, the two sellers sell a differentiated product to capture a
greater market share. In the grocery market, Woolworths and Coles are two duopoly players
(Fine 2016). In Australian airline business, duopoly structure is also found. There are some
industries in Australia there are possibility of emerging a duopoly structure if barriers is relaxed.
Recommendation
Any form of imperfectly competitive markets generally not desirable. These forms of
markets are unfair for consumers and they are often considered inefficient. In Australia, the
threat of different forms of imperfect competition is growing rapidly. Regulation should be
relaxed in the industries. New entrants should be given permission to enter in the market. In the
telecommunication industry for example the dominance of Telstra should be reduced. It is
difficult to make the industry fully competitive. However, some form of competition can be
welcomed with allowing entry of potential competitors. In fact, oligopoly structure is better than
the dominance of a single seller. NBN should allow TPG, Optus and Vocus to do business
independently in the industry.

6MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
Conclusion
The paper evaluates a news article on Australia’s monopoly, duopoly and oligopoly
market structure. Monopoly prevails in public utility services like water supply, electricity and
infrastructure. These are natural form of monopoly. However, the telecom industry in Australia
maintains a monopoly structure with dominance of Telstra. Recently ACCC has changed its
focus and aims at reducing concentration. This troubles the big business that earlier receives
support in maintaining their monopoly power. The paper considers the case of telecom industry.
The same is the case for grocery retailers in Australian supermarkets.

7MONOPOLIES, DUOPOLY AND OLIGOPOLIES IN AUSTRALIA
References
ABC News. (2017). NBN likely to entrench broadband oligopoly: analysts. [online] Available at:
http://www.abc.net.au/news/2016-04-08/nbn-to-entrench-broadband-oligopoly/7310228
[Accessed 24 Aug. 2017].
Barry, T.S., 2017. Regulating network charges in an upstream monopoly market that supplies a
downstream retail duopoly: A potential framework for NBN pricing.
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Cengage
Learning.
Fine, B., 2016. Microeconomics. University of Chicago Press Economics Books.
Hazledine, T., 2017. Mixed pricing in monopoly and oligopoly: theory and implications for
merger analysis. New Zealand Economic Papers, 51(2), pp.122-135.
Irvine, J. (2017). Get out of monopoly free cards can't be left to the roll of the dice. [online] The
Sydney Morning Herald. Available at: http://www.smh.com.au/federal-politics/political-
opinion/get-out-of-monopoly-free-cards-cant-be-left-to-the-roll-of-the-dice-20101026-
172ax.html [Accessed 24 Aug. 2017].
Nabin, M.H., Nguyen, X., Sgro, P.M. and Chao, C.C., 2014. Strategic quality competition,
mixed oligopoly and privatization. International Review of Economics & Finance, 34, pp.142-
150.
Tyers, R., 2015. Service Oligopolies and Australia's Economy‐Wide Performance. Australian
Economic Review, 48(4), pp.333-356.