Companys strategic behavior in terms of oligopoly

 

Content

 

INTRODUCTION 3

PART I. THEORETICAL BASES OF RESEARCHING OF STRATEGIC BEHAVIOR 5

1.1 Types of markets: definition and principles of functioning 5

1.2 Models of company’s strategic behavior on the oligopoly market 12

PART II.  COMPANY’S STRATEGIC BEHAVIOR IN TERMS OF OLIGOPOLY IN UKRAINE 20

2.1 Peculiarity of company’s strategic behavior on Ukrainian mobile-communication market 20

2.2 Evaluation the company’s behavior in the air transportation 22

2.3 Problems, that appears in national companies on the oligopoly market……......23

2.4 The ways of improvement the national company’s strategic behavior on oligopoly market…………………………………………………………………....26

CONCLUSION 29

THE LIST OF RECOMMENDED LITERATURE 31

 

 

 

Introduction

 

Current economic situation is a combination of different forms of relations between economic actors. Certainly the key relationship in the system is market relations. Market relations, as a set of commodity-money relations between seller and buyer, are a broad economic category. The type of market structure depends very much. In today's world, among the four market structures are only two real: oligopoly and monopolistic competition. Deserve the most attention is oligopoly markets, because large corporations, which operate on oligopoly markets determine economic conditions and economic development trend of various countries and international economic relations, which is especially important in crisis changes vector relationships. Therein lays the relevance of this work.

The objective is to conduct research firm’s strategy on oligopoly markets.

For the purpose of work, was formed several tasks:

1. To explore the theoretical aspects of oligopoly, such as market structure
2. Identify the types of oligopoly models, noted the key differences and similarities in the strategies of firms in these or other models
3. Analyze the current state of some oligopoly markets in Ukraine, to determine the causes and consequences of such conditions.

The research object is the structure oligopoly markets, and particularly their function in modern terms.

The subject of research is the strategic behavior of firms on oligopoly markets, and problems arising in markets with oligopoly structure.

This issue is widely reported in the literature. Among the authors of Foreign note the following: Busyhyna V.P., Zhelobodko E.V., Kokovyna S.G., Tsyplakova A.A., Aumana R., J. Nash, M. Porter, P. Krugman. Among Ukrainian scientists are engaged in this issue: Hrontkovska G.E., Filyuk G.M., Ohlih V.V., Shapovalov A.A., Oleinik O.V.

Scientific novelty and contribution are: the theoretical generalization of existing structural hierarchy of types and models of market structures; in research and theoretical and applied analysis of processes on individual markets oligopoly Ukraine.

 

PART I. Theoretical bases of researching of strategic behavior

1. Types of markets: definition and principles of functioning

 

In the process of historical development of society, manifested a great diversity of markets and methods of their classification. One, of the more general classifications of markets - the type of market structure, that is the nature of interaction between entities in a particular industry. The current scheme of two-types of market structures. The first phase of the division of the "pure competition" for perfect and imperfect, and the second - according to the peculiarities of behavior in imperfect competition, according to monopolistic competition, monopoly and oligopolies. The criteria for classification are:

1. number of sellers and their market shares
2. level of product differentiation
3. conditions of entry and exit from the field
4. producers’ level of control over prices

nature of the behavior of firms. [1, p.145]

Depending on the content of each combination of features and forming

different types of industry markets, characterized by varying degrees of competition.

Now more about each type.

Perfect competition. To clear the market (perfect) competition, these signs are:

1. A lot of sellers who compete on equal terms with each other. The term "lot" has no quantitative terms, there may be thousands, tens or even hundreds of thousands. The main thing is that the each share in the market was so small that the increase or decrease in sales of any of them will not reflect on the general market situation. Of course, such conditions are rare. However, certain conventionality of this attribute corresponds to agricultural markets in developed countries, the stock trades or sales of foreign currency in exchange. [2, p.120].
2. Standard products offered for sale. This means that the consumer does not distinguish the goods of one seller from the goods of another, even if they have differences. So it equal, the product of whose seller you will buy.
3. Absence of possibility for a separate salesman to influence on a market price. A salesman can offer the products on lower prices comparatively with those which were folded at the market. However it, at first, not will influence on a market price in general, as part of separate salesman at the market is wretched, but secondly, will conflict with original assumption about maximization of benefit as basic reason of behavior of economic subjects, in fact in this case the income of salesman will diminish comparatively with a sale at market price. There is not other choice for him, how to sell a commodity on market prices. Therefore a salesman in the conditions of perfect competition is mostly named "that, who accedes to the price".
4. Free entrance and exit from industry. A market will be a competition only then, when no legislative, technological, financial or other barriers, which would prevent to appearance or disappearance of new firms which produce a certain product, will be. It follows to mark on this feature of perfect competition, as exactly on its explanation of mechanism of adaptation of industry is based to the requirements of market in a long-term period. [3, p.354][4, p.95]

In the conditions of pure competition, as marked already, a firm can not pursue an own price policy. She can, only to adapt to those prices which on this time was folded at the market. Thus, it is possible to do a very important conclusion: how many products a competition firm would not offer for a sale, it in any way will not influence on a market price. Otherwise speaking, unlike market demand a demand curve which a separate competition producer runs into is absolutely elastic. (Fig.2)

A monopoly is a presence at the market only of one salesman and many customers. Both market structures express the extreme form of imperfect competition, opposition to perfection competition market.

Monopoly characteristics are following:

1. the only salesman at the market - if products are produced only by one firm, she personifies whole industry;
2. productions of specific homogeneous product which does not have near and perfect substitutes;
3. market power (situation of "price maker") - means possibility of salesman as an only producer of commodity, and at the terms of monopsony - customer as the only consumer to influence on the cost of commodity;
4. the blocked entering into industry.[5, p.247]

Barriers of including to the market are principal reason of origin of monopolies. According to the origin of barriers emit several forms:

• barriers, created by an economy from a scale
• barriers, created by the state (patents, licenses and other)
• market size
• property on the important types of raw material
• "Unfair competition".

No barriers of including are absolutely insuperable, especially in a long-term period that is why monopolies in modern reality are rare, mainly supported by the state. Market model with a single supplier for the product has close substitutes, called pure monopoly. Monopoly has the same goal, and that a competitive firm: select the output that allows you to get the maximum economic profit for the period. When selecting the optimal amount of monopoly faces three constraints - cost of production, product demand and its price. Select a monopoly can be analyzed using the same two approaches that were used in the study of patterns of competitive firms: a comparison of total revenue and total costs and marginal revenue comparisons and marginal costs .[7, p.78]

The situation of the firm - a monopolist position is fundamentally different from firms in a market of perfect competition. The main closure is to influence the market price. While a competitive firm takes market price as the value of objectively given a monopoly itself appoints the price of their products. At the same time as the monopolist can sell all their output at the same price, and assign each group a different consumers.

Possibility of a price does not mean that the monopolist will seek to Realize the full set. Since the industry represents a monopoly, it faces a market demand curve that determines the set of correlations between price and volume of demand, so arbitrary manipulation of prices is impossible. [3, p.134]

Monopoly does not offer curve. It defines the issue, focusing on the demand curve.

As we know, the demand curve is downward elasticity varies at different intervals. On small volume of elastic demand, and significant - inelastic . Total revenues for the seller elastic demand curve segment with a lower price increases, and the inelastic - decreases, reaching a maximum value at the point of unit elasticity. Therefore, the total revenue curve monopoly looks upwards convex function. Monopoly always chooses the output of elastic demand curve segment, where total revenues increased. [8, p.300]

The company - once the monopolist decides on output and price of products, while competitors only determine the amount. To optimize the production of the monopolist uses the universal rule limiting production , just as for models , and for models .[5, p.285]

Monopoly power - the ability to influence the market price - is implemented based on monopoly pricing strategy.

Monopoly firm assigns a price above the marginal costs by an amount inversely proportional to elasticity of demand. At a high elasticity of demand is low cape, the price would approximate the marginal cost, that market will be close to competitive, where a monopoly does not give special preferences.

The main objective of monopoly pricing strategy - as the largest seizure of consumer surplus and turning it into a monopoly profit. It is implemented through the policy of price discrimination - the sale of the same product to different buyers at different prices.

There are three types of price discrimination: discrimination first, second and third degree. [9, p.187]

 

Monopolistic competition - a market structure where a relatively large number of small producers offering similar goods are close substitutes, which are slightly different from each other. In monopolistic competition markets include markets books, medicine, sporting goods, coffee, soft drinks, soap, shampoo, toothpaste, etc..

Monopolistic competition has the following features:

• relatively large number of small firms
• differentiated products
• some, but limited control over price
• non-price competition
• relatively free entry into the branch and leave. [11,  p.143]

 Because differentiated products, each manufacturer of a branded product acts as a monopolist and a downward demand curve. The entry of new firms in the industry free, therefore, firms compete with each other. Despite the monopoly power of an individual firm, each too small to significantly affect the overall market situation, and it does look like a competitive market. So, in monopolistic competition considerable competition combined with low monopoly power over the market. [8, p.68]

The concentration of production in areas with monopolistic competition is not high. Lerner index for the market is monopolistic competition in between zero and unity.

Oligopoly - the industry in which most of the sales made by several large companies, each able to influence the market price of our own actions. Oligopoly refers to the actual market structures and the most common in modern high-tech industries.

Oligopoly market covers a considerable space between pure monopoly and monopolistic competition. It exists when the number of firms in the industry is so small that each of them in determining their pricing policies must take into account the response from competitors. [9, p.164]

Oligopoly distinguishes the following features:

• small number of firms in the field
• homogeneous or differentiated products
• universal interdependence of firms
• considerable control over price
• significant barriers to entry area.

Barriers to entry in Oligopolistic industry are quite high and constitute one of the reasons for the spread of oligopoly. The main entry barrier serves as economies of scale. A special reason for the existence of oligopoly is the effect of the merger. To encourage the firm mergers: the desire to achieve greater economies of scale and enhance their market power to eliminate a competitor, to gain the benefits of the big buyer in the market resources, and more. [12, p. 200]

Complexity of a model of oligopoly are two main reasons. First, the oligopoly has many manifestations. There is a "tight oligopoly" where the firm rule 2.3 on the whole market, and "vague" followed by the 70-80% market share 6.7 firms. Firms can act in secret combinations, and can make decisions independently. Products Oligopolistic industry can be standardized and differentiated. Barriers to entry in different areas and different. Secondly, the existence of universal relationship between companies, inability to predict the reaction of competitors is the main factor of uncertainty. [13, p.153]

The problem of strategic interaction between firms is central to the study of behavior olihopolistiv. Strategic decisions Oligopolistic firms studied using game theory. Economic games can be cooperative or noncooperative. The game is cooperative if the players' possible collusion and noncooperative, if a conspiracy between members is unacceptable.

There are concepts of dominant and non-dominant strategies. The dominant strategy is the optimum choice player, regardless of competitor. Non-dominant strategy is the optimum choice depending on one player that makes the opponent.

If one player acts in a lack of information or dealing with inappropriate subject of maxmin strategy is applied. It allows you to maximize the minimum profit.

In single or repeated games both players decide simultaneously in sequential - one by one, in which case the author has the advantage. The action, which gives the company an advantage, is called a strategic move. In the course of a game company can use threats and commitments: to resort to closure or withdrawal of certain facilities, or announcing the intention to produce a particular product. The firm can threaten lower prices - meaning that it starts a price war. [12, p.173]

In Oligopolistic market are two oppositely directed forces: companies interested in maximizing the total mass of profit for the industry, which generates a craving for conspiracy and joint action, and selfish interest of each company in maximizing its own profits by lowering product prices, pushing the company to breach agreements. "The olygopolists dilemma" reflects the impact of these two forces competing for decisions: whether to resort to aggressive competition, trying to capture more market share at the expense of rivals, or passively coexist, holding its market share by appointing high prices and limiting production. Competing passively, all receive higher profits. However, everyone realizes that rivals feel the temptation to bring down prices. Therefore, firms compete passively afraid, because the opponent may suddenly go on the offensive and capture significant market share. Neither firm can not trust their competitors, and expect from him a high price. The main difficulty in building a model of oligopoly behavior - this constraint faced by the firm. In general limitations - costs of production and demand - olihopolist specific constraints: the actions of competing firms. Behavior of firms from the reaction of competitors called Oligopolistic relationship. [10,  p.221]

In microeconomics is no single model of oligopoly. Developed partial equilibrium model - model Cournot, Stackelberg, Bertrand and a number of modifications, as well as generalized Nash equilibrium model - to determine the equilibrium volume of equilibrium price and Oligopolistic firms. Nash equilibrium - a set of such strategies, where each subject chooses the economy works best for you actions, based on the fact that others adhere to some (this) strategy. Because each player has no reason to deviate from the optimum, these strategies are stable. [14, p.86]

 

 

 

 

 

 

 

2. Models of company’s strategic behavior on the oligopoly market

 

Cournot model - a model of simple duopoliyi - oligopoly with two firms that produce homogeneous products. Each firm chooses output, which maximizes its profits, according to her ideas on possible solutions to competitors.

 

 

 

Each duopolist consider another production as fixed, the value of which is independent of its own production decisions. Both firms make decisions simultaneously. The price that the company will take will depend on the total output of both firms. Both firms have equal economic strength and produce a uniform product for their known linear function of market

demand: , where and – volumes of firm 1 and firm 2. If firm 2 is not produced products, i.e. , the curve of demand for a firm complying with the market demand curve. If the company providing the first   two units of market demand, then the demand curve for products of the company determined an equation:

or .

Firms maximize profits by producing the optimal output, defined by the rule , according to their functions reactions:

 

Two oligopolists reactions are presented in (Fig.1). Assuming that the firm produces a first volume , that firm 2 will produce a volume that corresponds (point A) on its reaction curve . Firm 1 will react to this choice of an appropriate volume level (point B) on its reaction curve . This decision will make the company a firm in February to review its own decision and she will choose the appropriate volume (point C) on its reaction curve . The end result of the process of adaptation is to establish a stable equilibrium point at the intersection of two curves of the reaction. [1, p. 144].

 

Set levels of two companies to match the equilibrium is called a Cournot equilibrium, which is a type of Nash equilibrium.

Bertrand model describes a market situation in which the two firms, as in the Cournot model, produce a homogeneous product. But the changing strategic indicator - firms choose prices rather than output volumes (Fig.1.2). Price competition forces both companies to lower the price to marginal cost , where they receive zero economic profit. Firms reach Nash equilibrium, which in this case is the competitive equilibrium.

Price war - a series of successive reductions in the prices of Oligopolistic market firms rivals. She is one of many possible consequences of Oligopolistic rivalry. Price wars are positive for consumers, but negative for profit vendors.

Suppose that locally there are several vendors for realizing such a standardized commodity, like bricks. Pricing of any given firm in the market depends on market demand for bricks and on how the company envisions the reaction of competitors in its price. Suppose that each firm in the market seeks to maximize profit. Assume that each firm assumes that its competitors will choose the price and will adhere to its decision. Thus, any given brick manufacturer will assume that if it will lower its prices, its rivals, in response to such a move will not lower their prices. They can start a price war. Since each seller thinks that the other will not respond to its lower prices, so each one is tempted to increase monthly sales by reducing prices. Lowering the price below the price of its competitor, each seller can capture the entire market and thus increase profits. [4, p.100]

The price war continues until the price falls to the level of average costs. In equilibrium, both sellers designate the same price, and economic profits are zero. The total market output is the same that would be in perfect competition.

Equilibrium exists when no firm can no longer benefit from lower prices. Price drop below that level will lead to losses. Since each firm assumes that the other will not change its price, it does not have an incentive to increase price.

Overall, the balance of Oligopolistic market depends on the assumptions that firms make about the reaction of their rivals. Sometimes Oligopolistic markets actually observed price wars. Occasionally this tactic used car filling in any area. Banks that serve smaller markets are also sometimes engaged in price war by offering nyzkoprotsentni loans or current accounts for a small fee, lower than normal. Everyone is trying to make their products more attractive to consumers, assigning a much lower price than competitors and rivals meet an even greater decline in prices. [7, p.67]

Price wars usually transient. Oligopolistic firms come together in cooperation for the pricing and allocation of markets so as to avoid the prospect of price wars and their adverse effects on profits.

Stackelberg model (in terms of leadership) is modified Cournot model for the case when one firm is a leader, has more economic power and an independent voice, so first determine its output. Another company is an outsider, which makes adaptation strategy and adjust their behavior depending on the choice made by the leader. In the Stackelberg model company - the leader ignores the fact that function of the reaction. She chooses the output, which maximizes its own profits. Stackelberg equilibrium is a special case of Nash equilibrium for the dominant strategy. [7, p.68]

The model of differentiated products duopoly apply to situations where firms produce differentiated Oligopolistic products, and they more logically in the competition not choose quantities and prices. Demand for products of each of the two firms depends on its own prices and prices of competitors. Both firms choose prices simultaneously, considering this as a price competitor. In response curves at the intersection of Nash equilibrium is established.

Model the dominant firm (kvazimonopoliyi) describes the situation when operating in one large firm and many small, are able to compete with it. This model is similar Stackelberg model, but in the case of price leadership. Demand dominant firm is defined as the difference between the aggregate market demand and volume offering competitive environment that satisfies this demand. The dominant firm sets output and price according to the rule , outsiders take this price and determine their own volume curve according to its offerings.

 

Model "broken the demand curve" illustrates the inflexibility Oligopolistic prices. The model describes the probable behavior of firms competing in a situation where one of them will then adjust the price. Other firms may follow or price change, or ignore it.

 When firms follow price changes, then when its price fall from one firm to increase its sales volume slightly, so that other firms will also reduce prices. If one of the firms increase the price, it will not be driven out of the industry, its sales did not decline significantly. This type of reaction is typical for inelastic demand, which corresponds to curve [Fig.3].

When companies ignore the change in price, the price fall in one of them, her sales will increase substantially, and if one firm will increase the price, the buyers will lose herself, her sales will fall significantly. In this case demand is more elastic and meets the demand curve on [Fig.4]. [6, p.231]

Reaction reflects the logic of firms broken at the point of equilibrium price the demand curve. The situation reflects the lower price segment demand curve , situation and raise prices - a segment . Left from the point of prevailing prices depressed demand curve and the demand more elastic, right - the rapid demand curve and corresponds to inelastic demand. On Figure also shown curves earnings limit and , that corresponding to the demand curve and . Since the demand curve at point broken, the marginal revenue curve has a gap on the volume.

Broken demand curve explains why the price changes in Oligopolistic industries where there is no conspiracy, are very rare. Each company may provide that any price change will worsen the situation. If it raises price, it loses much of its buyers, as demand is elastic, and if it will lower the price, the inelastic demand for sales increase slightly. Besides lowering prices might trigger a price war. When a firm produces the optimal amount determined by rule , changing the marginal cost curve within the gap does not affect output or price, which is additional evidence of inflexibility Oligopolistic pricing.[3, p.321]

"Prisoners Dilemma" - a Oligopolistic pricing model in which each firm by solving the problem of price level, operates under conditions that preclude cooperation, self realizes its potential, but pay attention to their competitors (Fig.5). On only two market seller (firm 1 and firm 2), each of which can be set or low or high price. If both firms set a high price, each will receive a profit of 20 thousand. And if both set low price, the profits of each amount to only 15 thousand. Thus, there is an incentive both to conspiracy and fraud to the opponent.

 

Figure 1.4.  "Prisoners Dilemma" [8, p.119]

 

If one firm will set a high price and the other low, the firm has low costs, will receive 30 thousand profit, but one that has a high - only 10 thousand. If firms could work together, they would assign a high price, but if they act independently, then they had better keep prices low. For example, if the first firm assigns a high price, the second firm maximizes profit by lowering its price. If the firm assigns a lower price, the company will receive two more if you also reduce the price by avoiding diminishing return. Thus, firm 2 maximizes its profits by setting low prices for any decision rival. The calculations are similar to the first firm, so firm 1 also appoints the always low price. The state of both firms however are worse than a conspiracy and setting both high prices. [6, p.123]

For members of secret conspiracies and explicit trend for maximizing the total profits of all participants. Their behaviour is similar to the behaviour of a monopolist. The most common form of explicit collusion is a cartel.

Model cartel meets the situation where the company formally entered into an agreement, agree on price, industry output and quota for each participant. To calculate the price and volume of cartel pricing model used by operators. Equilibrium volume for the cartel is a rule .

For this price agreed quota for each participant so that the sum of all quotas equal to the total volume was a cartel.

Compliance cartel agreement contrary to efficiency and reduces welfare, like a monopoly. Therefore using cartel prohibited antitrust laws of many countries.

Secret agreements are not formally documented and are difficult to detect. However, they allow reaching an agreement regarding product pricing or market share of each participant. As a result of oligopoly collusion is similar to a monopoly on production levels and prices.

Model "price leadership" is a common means of coordinating behavior of oligopolists the absence of collusion. Since acquiescence largest market participants or the most efficient firm has the role of industry price leader, others set prices after him and do not change them until the leader announce a new change in its price. Gradually increasing prices, the industry can achieve such a high level of prices as a cartel. Price leader not to change prices infrequently. He does not respond to small changes in costs or demand for its products. Price revision is only when the changes concern the industry and are highly significant.

Pricing Model "cost plus" - a practical method by which the company estimates its costs at a certain target level and sets the interest costs on the cushion so as to ensure the average income in the long run - about 15% of all invested capital. It specifies the default value, which serves as the basis for further adjust its level.

Since the oligopoly structure is close to a monopoly, it has similar economic consequences for society: in most cases, high barriers to entry in the branch leading to limit production and installation of higher prices, there are irreversible welfare losses not provided or production efficiency or effectiveness of distribution resources. [10, p.142]

 

 

Part II. Company’s strategic behavior in terms of oligopoly in Ukraine

2.1 Peculiarity of company’s strategic behavior on Ukrainian mobile-communication market

 

Last year CPI growth in Ukraine by the State Statistics Committee has exceeded 12%, while tariffs in the mobile market continued to decline. If there are still tariff reduction occurred in parallel with the rapid expansion of subscriber base and lower prices were offset by increasing the number of clients in the past three years the situation has changed. Rates continued to decline, and the total subscriber base at the same time remained constant. Market penetration in the mobile market Ukraine has stabilized at 120%, indicating that a few sim-cards for many mobile users become the norm. Achieved the level of market penetration slightly less than, say, Germany or Russia, but at the same time, higher than the markets of countries like France, Poland, Belgium and Norway. [9, p.201]

Speaking of prices, it is useful to recall that existing at present prices for mobile services in Ukraine are the lowest in Europe. The average minute of a cellular phone costs Ukrainian 1,5 cent, almost three times less than in Russia, more than 8 times less than in Poland, and 16 times less than in France.

 

 

As seen from (Fig.6) the leader of Ukrainian mobile operators is the "Kyivstar". The situation in Kyivstar in the market is best characterized by two numbers. The first - a market share of the company. Measure it conditionally virtual "Subscriber" - it is futile. The purpose of business is the additional cost money, but not SIM-card in itself, is not it? So, for company earnings is not the first year to over 50% market

share. Moreover, Kyivstar from year to year and demonstrates the phenomenal profitability: 50% for EBITDA. For the ratio of net income to revenue - almost 30%. Strange - although allegedly exacerbated competition, but your bottom is not affected. How can this be? The reason for this "miracle" is anti-competitive barriers that are unable to deal with competitors. Kyivstar is in a very comfortable position when he is not spending enough to compete, and scale. And since the company also abonbaza greatest, no Astelit or URS could not make it a real competition.

In conditions of significant inflation in the economy and devalued the national currency can talk about a specific depletion of resources for further reduction of tariffs on basic mobile services. Large-scale "collapses" prices, similar to those observed in the market in recent years, in my opinion, unlikely. Rather we can talk about the tariff increase flexibility offers operators and to provide customers greater freedom in determining the optimal set of services for them.

In fact, the main strategies of firms in the mobile market aimed at the diversification of our service package. Antimonopoly Committee regularly monitors the market of mobile services in conjunction with the National Commission for Communications Regulation. The main reason for monitoring is Article 12 of the Law of Ukraine On Protection of Economic Competition, which states that may be considered a monopoly market share of one firm which has more than 35%.[14, p.243]

 

 

 

2.2 Evaluation the company’s behavior in the air transportation

 

Regular flights in 44 countries, conducted in 2009, 11 Ukrainian airlines. They made 33 thousand regular flights and transported nearly 2, 4 million passengers. For comparison, in 2008 the airline carried 32 thousand flights and carried 2.5 million passengers. At the same time to Ukraine scheduled flights carried 45 foreign companies from 32 countries who traveled for a year about 3 million passengers. Currently, 73 companies have licensed to operate, less than half of them for business purposes as an airline. Air Traffic Market of Ukraine, is a prime example of oligopoly market structure. It is characterized by the presence of several large companies ("May", "Airlines"), a sufficient number of small firms, homogeneous products, better services (flights), severe restrictions on entry to the industry as necessary to obtain a license to fly, pass technical reviews have sufficient fleet. The presence of price competition. At the same time, this market is a peculiar phenomenon of price discrimination. Especially 3 degree price discrimination and discrimination over time. So really, the Ukrainian air transportation market is oligopoly. However, this market is very segmented. Oligopoly clear structure defined two segments - domestic and foreign passenger traffic. Charter flights, as a specific unique product should not be construed as product oligopoly. Therefore, more detail about the features of internal and external transportation in Ukraine.

The main features of the external traffic associated with the following:

1. The distribution between the companies on the one hand free, but on the other side of the international transport require specific, high requirements for the aircraft to service, to load drivers, the level of service.
2. The international transport market is not a perfect market competition on a global scale. The number of flights undertaken by this or another country depending on the relations between the countries. In fact, there are bilateral quotas. That is, the Ministry of Foreign Affairs shall agree between themselves on the number of flights, and then transmit specialized agencies sharing among law firms.
3. Market, as already noted, is bilateral, that is, if the contract to increase the flights, they are divided in half between the countries is actually limited to demand that creates additional limitations in predicting and managing daily operations of airlines.

For domestic traffic, the main features is the availability of local carriers that do not go to the international level, and flights that serve 2.1 (Ternopilavia ") and which do not compete with larger companies. Also, in order to lower fleet requirements. There is usually a lower level of service. And, if objectively there oligopoly structure is shown in a somewhat different context: this competition railways, road transport and aviation. And here, primarily by price range wins UZ. And the basis for this advantage is economies of scale. [7, p.205]

 

 

 

2.3 Problems, that appears in national companies on the oligopoly market

 

For nearly 20 years in Ukraine took place the transition from planned economy to market administration, in which more than half of all goods and services produced by business entities that operate under conditions of significant competition. However, the ratio of competitive and monopolistic sectors experiencing now in Ukraine's economy was characterized by industrial countries in the middle of the twentieth century. Excessive weight is a total production area of natural monopolies, imperfect - the mechanisms of state regulation in this area, is unreasonably high level of concentration in a number of potentially competitive markets, particularly regional and local, in most markets is not a level playing field for all economic entities. [4, p.198]

Examples of national commodity markets olihopolnoyu structure in Ukraine at this time are: coke market (the market there are 13 producers, the share of three largest in recent years was 42 - 51 percent), motor gasoline market (by market operators are seven large enterprises in total for three the biggest exceed 67 per cent), the beer market (about 94 percent of the market to the four competing entities), tobacco (from 22 economic entities operating in the market share of the three largest of more than 75 percent, five largest - over 97 percent), peat (the market in 2004 there were 32 participants, the three largest share - over 55 percent), cement (the largest share of the three entities is more than 40 percent, top five - over 60 percent) . At the regional level oligopoly structure are mostly markets for processing of agricultural products.

In some cases, there is increased concentration oligopoly markets: for example, the combined share of the four largest producers of beer increased from 88 percent in 2007 to 94 - in 2009 total for the two largest mobile operators - from 85 percent in 2005 to 98 percent - in 2009. [10, p.32]

It should be noted that in most markets with oligopoly structure observed growth. For example, the mobile services for 2004 - 2009 years has increased

7 times, cement production has increased 2.1 times, production of beer in 2004 - 2008 increased by 80 percent. This is largely due to a combination of oligopoly market is intense competition between the participants with the benefits of scale.

The main problems in oligopoly markets can be divided into several main groups:

1. Wide. These include problems associated with corruption and shadow economy activities, the crisis in the economy (at present time).
2. Special:
• Almost all oligopoly markets are held in a particular process of development cycle, which occurs in the middle of consolidation and monopolization (duopolisation), followed by recovery oligopoly structure that makes viewing strategy.
• Ukrainian oligopoly markets characterized by the presence of a leader on the market that having more than 35% market share regularly checked by the AMC.
• Inconsistency of policy the agency's regulation oligopoly markets.
• Price war.
• Unfair competition, advertising war, Black PR.
• Raiding, this became one of the main ways to fight competition in Ukraine.

In Ukraine there is considerable possibility of imposing fines for participating in the cartel collusion. In particular the Law of Ukraine "On protection of economic competition:" Penalties could reach ten percent of income (earnings) of the entity from the sale of products (goods and services) for the last reporting year preceding the year in which fine. And the income (proceeds) of an entity from the sale of products (goods and services) is defined as the aggregate value of income (proceeds) of products (goods and services) all legal and natural persons in the group that is recognized entity ".[13, p.98]

However, it appears that the Antimonopoly Committee of Ukraine - the main government body that monitors compliance with the law on protection of economic competition - until it fully utilizes the potential imposition of fines. As the largest fines to date know that sometimes they reached approximately 100 million, but the use of such a high fee is actually an exception to general practice.

On the one hand, this practice does not necessarily indicate a problem. Maybe we just are not there are violations that would require more frequent use of high fines. The problem, according to many economists, it appears in another. Currently unclear is the calculation of the Antimonopoly Committee of Ukraine the amount of fines imposed in each case. It is unclear, particularly whether the Antimonopoly Committee of Ukraine carries out mathematical comparison of the damage caused to consumers and violators received benefits. Without such analysis, the fine can be lower on profit and completely lose their punitive function. Calculations of penalties assessed, unfortunately, are not disclosed. As a result, this practice does not add transparency in the work of the Antimonopoly Committee of Ukraine. [8, p.251]

So at this stage there are a number of issues of general as well as special character. However, is not the greatest threat to stability problems of institutional regulation of cartels, which leads to even greater economic imbalances in the business environment. [5, p.172]

 

 

 

2.4 The ways of improvement the national company’s strategic behavior on oligopoly market

 

Ukrainian oligopoly, including diversified and multi-complexes, are among the most profitable enterprises. Often they are the city and forming, and they provide competitive advantages of Ukraine in the international market (steel plants). Therefore, their economic efficiency (profitability) is undisputed. On the main ways to improve, it is clear that in economic terms need some enterprises fixed assets (air, metallurgy), and an internal demand for goods (JSC KhTW, other metallurgical plants) because their orientation solely on foreign markets together with their role for local and state budget creates additional risks to public finances. Pay particular attention to institutional aspects of development. Primarily, it refers to criminal liability for cartel collusion. Either way, the society of Ukraine can not quite ready to apply criminal sanctions for anticompetitive concerted actions are not fully aware that the law on economic competition is enshrined in the Constitution of Ukraine, and society, each individual consumer can pay twice or even three times more for certain goods or services without even knowing the reason for inflated prices could be a cartel conspiracy. [10, p.93]

Requires practical implementation of the mechanism of partial exemption from liability for disclosure or conspiracy to anti-competitive actions. Ukrainian antimonopoly legislation provides for the possibility of use of full or partial exemption from administrative liability for participation in the cartel conspiracy voluntary disclosure because of collusion cartel participant (but only for full immunity, reduction of fines is not expected within that program), but in practice the relevant provisions of Ukrainian law still not working at the proper level. For effective use of such programs in Ukraine should consider and balance several important issues raised in the experience of practical application of such programs in other states. It also should include the application fee and the subjects which are still not in Ukraine. [13, p.232]

 

Requires precise control of the ecological compatibility, since large companies often are the main polluters of the environment that adversely influence the ecological environment as a whole.

And fourth, and perhaps the most important and most urgent. Necessary to Ukrainian companies, large companies and usually operate on oligopoly markets were measures of social responsibility. This will enable businesses to develop and effectively relieve social tension in society. [3, p.154]

Also, the stage must be clearly provided crisis management, allowing companies to operate effectively. On the other hand, in many areas of the crisis had already done that "could not" make the market - restructuring. For example, airlines, trying to maintain market position, engrain new services (such as online check-in) and rates (promotions and discounts) agreed on joint flights under code sharing. Much attention is paid to optimize the cost: reduced state, the frequency of flights and even abandoned some areas. The total number of flights per year decreased by 16.14% to 84.2 thousand fleet optimization was found some old aircraft changed to more efficient new or completely rejected the part of the fleet. If Dnipravia such measures helped to increase passenger traffic at 45.1%, the resulting Airlines lowered the volume of traffic on 44,8% (in 2008 carried 2.51 million people), lost market leadership. The largest company last year was May, it carried 1.56 million (-7.6% to 2008). [12, p.144]