Oligolpolio: Televisa Y Tvazteca

INDEX

Introduction 1
Oligopoly 2
TvAzteca 10
Televisa 13
Advantages and Disadvantages 18
Conclusion 19
Bibliography 20

INTRODUCTION

This final project will aim to study in detail the oligopolistic market structure which refers mainly to a few producers with some degree of market control, taking as example the strategies used by renowned companies Televisa and TV Azteca.
Wewill explain how the decisions made by one company influence the decisions of the others, and show the pros and contras of this kind of imperfect competition.

OLIGOPOLY

Is a market form in which a market or industry is dominated by a small number of sellers; each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, thedecisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants. Oligopolistic competition can give rise to a wide range of different outcomes. The firms may employ restrictive trade practices to raise prices and restrict production in much the same way as a monopoly.
Firms often collude in an attempt to stabilizeunstable markets, so as to reduce the risks inherent in these markets for investment and product development. There are legal restrictions on such collusion in most countries. There does not have to be a formal agreement for collusion to take place, in some industries there may be an acknowledged market leader which informally sets prices to which other producers respond, known as price leadership.
Inother situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching perfect competition. The competition in an oligopoly can be greater when there are more firms in an industry than if; for example, the firms were only regionally based and did not compete directly with each other.
Thusthe welfare analysis of oligopolies is sensitive to the parameter values used to define the market's structure. In particular, the level of dead weight loss is hard to measure. The study of product differentiation indicates that oligopolies might also create excessive levels of differentiation in order to stifle competition.
In oligopolies, there are distinct barriers to entry (large scale productionor strong branding of the dominant firms). In some oligopolies there may be low barriers to entry. 
The key feature of oligopolies is that there is interdependence. Because there are a small number of large firms, these need to take careful notice of each other’s actions. This may lead to firms to collude avoiding unexpected outcomes, maximizing industry profits. However, there is strong pricerigidity where prices tend to change much less than in more competitive markets.
That’s why Televisa and TvAzteca have become the leader’s television companies in Mexico, characterized by its high participation inside the oligopoly market worldwide.
Profit maximization conditions: An oligopoly maximizes profits by producing where marginal revenue equals marginal costs.
Ability to set price:Oligopolies are price setters rather than price takers.
Entry and exit: Barriers to entry are high. The most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. Additional sources of barriers to entry often result from government regulation favoring existing firmsmaking it difficult for new firms to enter the market.
Number of firms: "Few" – a "handful" of sellers. There are so few firms that the actions of one firm can influence the actions of the other firms.
Long run profits: Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits.
Product differentiation: Product...