Airasia as a Oligopoly

1        Is there example of monopoly,monopolistic competition or oligopoly? Why did you thinks so? Explain.

Airasia is example of oligopoly, because oligopoly is an industry  that are dominated by a few firms[1].There are have four industry in that market,that is Malaysia Airlines, Firefly, Malindo air and Airasia. Four industry that are dominant the market are the example of an oligopoly. If just only one industry dominant that market and there is no close subtitutes, it is example of pure monopoly, where others firm are not allow entering that market[2]. Moreover Airasia is example of oligopoly because it show that other firm are not easy entry that market, and the easy entry are limited. It is because of the higher cost of producing airlines and because of high fuel prices. In addition, Malaysia Airlines and Airasia made agreement in August that will be maximize joint profits. Malaysia Airlines and Airasia announced a surprise alliance that will eliminate head-to-head competition on some routes, and allowing each other to focus on core markets. Therefore  Malaysia Airlines will be able to cater to more upmarket travelers, while Airasia will be able to  concentrate on offering low-cost journeys. It is called cartel, where a group of firm that gets together and makes joint price and output decision to maximize joint profits[3]. Cartel is the Collusion Model, where it is example of an oligopoly models. There are 3 oligopoly models,it is collusion model, price leadership model, and cournot model. So  the collusion model are showing that Airasia is example of oligopoly. Moreover Airasia Chief Executive Tony Fernandes expects that both airlines will made an announcement on its collaboration in the first week of December , according to Dow Jones Newswires. The collaboration among Malaysia Airlines and Airasia show the interdependence among  the firms and it is an oligopoly the Cournot Model,it was introduced in the 19th  century by the mathematics Antoine Augustin Cournot[4].The original Cournot model focused on an oligopoly with only have two firms producing identical products and not colluding. There are two firms in airlines, it is Malaysia Airlines and Airasia that are producing identical products and they are known as a duopoly. It mean that firm’s optimal decisions depends on the actions of the other firms in airline industry. In a duopoly, the right output choice for each of the two firms will depend on what the other fims does. It mean that,the decision choice does of airasia will depend on what Malaysia Airlines does. So it is the reason why im thinks that airasia is an oligopoly.

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[1] Karl E. Case et. al, Principles of Microeconomics, 10th Edition, Pearson Education Limited, page 325

[2] Karl E. Case et. al, Principles of Microeconomics, 10th Edition, Pearson Education Limited, page 303

[3] Karl E. Case et. al, Principles of Microeconomics, 10th Edition, Pearson Education Limited, page 329

[4] Karl E. Case et. al, Principles of Microeconomics, 10th Edition, Pearson Education Limited, page 331