Anti competitive behaviour amongst oligopoly firms and government Essay

Anti competitive behaviour amongst oligopoly firms and government regulations - Essay Example For this study, a brief concept of competition law will be provided followed by discussing some economic factors that enables oligopolistic firms to violate the competition law in the markets. Upon discussing the negative economic consequences of forming oligopoly firms, the role of government regulations on how to control and minimize the negative impact of collusion within the oligopolistic market will be thoroughly discussed. Competition law promotes free trade and healthy competition among the local and international businesses in order to protect the economic welfare of the consumers from businesses that will abuse its market power within a particular industry. (Vedder, 2004; Opi, 2001) As part of promoting free trade in the market, competition law is very much focused on eliminating and reducing the cases of monopolistic competition. Basically, the promotion of a free trade competition enables the consumers to enjoy the privilege of With the purpose of dominating the market, product characteristics dictate the ability of oligopoly firms to enter into collusion. Using the Nash benchmark, the study conducted by Engel (2007) reveals that there is a higher possibility for companies that sell heterogeneous products with few substitutes to collude as compared to businesses that sell homogenous products. It means that businesses that offer heterogeneous products have more competitive advantage or niche as compared to other businesses. The size of the market and the number of manufacturers that produces the same product also affects the ability of oligopolistic firms to enter into collusion. Basically, the bigger the market size in terms of the total number of people within a population would mean that there is a bigger demand for the product. On the other hand, the lesser the number of manufacturers that produces the same type of goods would mean that the supply for the product would be lesser as compared a situation