Policies Toward Monopolies and

Oligopolies, Privatization and

Deregulation
J OYC E I . A Z AU L A
III-BSA

Monopoly
Single seller
Market characterized by
1. A single seller of a well-defined product for which
there are no good substitutes, and
2. High barriers to the entry of any other firms into the
market for that product.

Oligopoly
Few sellers
Market characterized by
1. A small number of rival firms
2. Interdependence among the sellers because each is
large relative to the size of the market.
3. Substantial economies of scale, and
4. High entry barriers to the market.

Interdependence among Oligopolistic

Firms
Sellers in an oligopolistic industry is small, the

supply decisions of one firm will significantly

influence the demand, price, and profit of
rivals. This adds to the complexity of the
firms decision making.

Substantial Economies of Scale

In an oligopolistic industry, large-scale

production is generally required to achieve

minimum per-unit cost. Economies of scale
are present, so a small number of large scale
firms can produce enough of the product to
meet the entire market demand.

The products of sellers in an oligopolistic

industry may be either similar or

differentiated.

Price and Output Under Oligopoly

An oligopolist, unlike a monopolist, cannot

determine the product price that will deliver

maximum profit simply by estimating its own
costs and the existing market demand.

Objectives of
Disinvestment/Privatization
The major objectives of the
disinvestment/privatization can be summarized
as follows:
1. Revenue collection
2. Improvement in efficiency
3. Market discipline
4. Resources mobilization
5. Direct participation of public
6. Encourage employee ownership
7. Reduction of bureaucratic control

Arguments in Favor of Disinvestment/Privatization Process

1. The basic problem with PSEs is neither the

equality of assets nor the skilled manpower,

but the overall decision making system.
These enterprises would realize true
potential only when they are privatized.
2. The disinvestment and privatization process

could bring in better corporate governance,

transparency, corporate responsibility,
exposure to competitive forces,
improvement in work environment and so
forth.

Arguments Against Disinvestment/Privatization Process

1. Selling of profit making and dividend paying

PSE would result in loss of regular source of

income to the government.
2. There would be chances of asset stripping

by the strategic partner.

3. The governments policy of disinvestment

includes the disposal of both profit making,

as well as potentially viable PSEs.