Micro

The industry our team researched was Southwest airline travel. Through our findings, we found that Southwest airlines are in an oligopoly market. An Oligopoly is a market dominated by a few large suppliers. Firms within an oligopoly produce branded products and have barriers to entry. There are few large producers in the market model of oligopoly. It covers much ground range and is from pure monopolistic competition. Three huge firms dominate an entire market; an example of this would be the “Big Three,” which includes Ford Motor Company, General Motors, and Chrysler.

An important characteristic of an oligopoly is interdependence between firms. This means that each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions. This does create some uncertainty in such markets. Economics seek to model through the use of “the game theory.” (Economics is a game in which players anticipate one another’s moves.) The “game theory” is a means of analyzing the pricing behavior or oligopolistic that use the theory of strategy associated with games such as chess and bridge.

One way that Southwest airlines are an oligopoly is through product differentiation. Product differentiation is a marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products. Successful product differentiation creates a competitive advantage for the seller, as customers view these products as unique or superior. (Answers.com)

Product differentiation can be achieved in many ways. It may be as simple as packaging the good in a creative method, or as incorporating new functional features. Sometimes differentiation does not involve changing the product at all, but creating a new advertising campaign or other sales promotions instead.

Differentiation can be a source of competitive advantage. Although...