General Motors is one of the largest firms in the United States that supplies automobiles. It has an Oligopoly market structure.
Oligopoly is according to Investopedia, “a market structure with a small number of firms, none of which can keep others from having significant influence.” The automobile industry in the United States comprises of Three main firms. The three firms are General Motors, Chrysler, and Ford.
There are some characteristics that support General Motors as an Oligopoly. Interdependence is one for example because as mentioned before, there are only a couple other firms that compete with General Motors and any changes in the price and/or product by any of the firms would have direct impact on its rivals. Another example is advertising and selling costs because in this type of market, these firms apply defensive as well as aggressive strategies to gain greater share in the market. Other market structures like Perfect Competition and Monopolies, don’t really need advertising. There does exist some Monopoly in under an Oligopoly because each firm does have control over a large part of the market.
According to the illustration below, for General Motors they are always looking to keep profits rising so that they keep their position in the market. If they were to increase their price, they could probably lose customers, because the rival firms would gain them. If they were to lower prices, rivals may lower their prices as well.
General Motors would probably keep prices that of their rivals because no change in prices would most likely not have an increase in customers. Prices stay stable because even if General Motors marginal cost were to change, it will not cause them to have to change its pricing on automobiles. Therefore MR=MC.
