Oligopolistic market

On the supply side, patents allow the innovating company considerable discretion in pricing their new products. However, new products may be complements or substitutes of those of rival companies. In reality, pharmaceutical firms operate in oligopolistic markets characterized by a limited number of competitors (especially in submarkets such as that of cardiovascular products, for example), differentiated products and competitive innovation strategies. 

A number of theoretical models seek to explain the behaviour of firms in oligopolistic markets, including the classic Stackelberg, Bertrand and Cournot models. 

It may be a concern that excessive transparency could facilitate collusion between the major market players, particularly on an oligopolistic market. A balance must certainly be found as to what data is published and how it is published, in order to improve transparency without enabling collusion. 

Market structure advantage The large number of local producers spur competition and maintain a constant flow of innovations. In Malaysia more than 100 small firms operate in the hair care sector. As a result, the variety of products is much higher and the discovery of new consumer trends is more likely in these countries than in the oligopolistic markets in Europe, the United States and Japcin. A few large firms dominate the personal care business and the consumer distribu-... 

Even in an ideal situation in which the doctor is a perfect agent for the patient, the need to regulate prices in the pharmaceutical market may arise from insufficient or very weak competition owing to the temporary market power of the manufacturers, the oligopolistic nature of many therapeutic submarkets, low elasticity of demand and imperfect prescriber information.1... 

The implications from this are that firms should be expected to maximize the dual objectives of profits and sales if (1) managers are powerful relative to shareholders, or (2) the market structure is oligopolistic and quantity leadership provides a profit advantage. It follows that managers might find it optimal to use the lump sum represented by their grandfathered allowances as a war chest with which to reduce prices and increase sales in the output market, in an attempt to take Stackelberg leadership, as outlined earlier. 

The complicated political relationships as well as the considerable problems experienced during data collection led the NAP authors to seek an allocation procedure that was as simple as possible. Discussion of different sector caps would have complicated the process to a much greater extent and would have nourished the redistribution dispute within the German industry which was already raging. Additionally, the question as to whether and to what extent sectors such as for example the electricity industry would be in a position to pass on the opportunity costs of the allowances to consumers was still hotly disputed in 2003 and 2004 in view of the oligopolistic structures of the German electricity market. 

An industry is dominated by a monopoly or a few oligopolistic firms where outputs are reduced and prices are higher than competitive markets. 

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