Dynamic Models of Oligopoly

Question: Discuss about the Dynamic Models of Oligopoly. Answer: Introduction The article chosen provides about the oligopoly behavior in the Trans-Tasman Air Travel Market of New Zealand. This air-route carries more than one million return travelers between Australia and New Zealand each year (Duval, 2013). Discussion Few firms mostly dominate an oligopoly market and the airline industry is considered as a part of the oligopoly market. The airline is industry is characterized as oligopoly as although there are few barriers to entry, it comparatively less than a monopoly market. As a there are less barriers to entry, it is not probable for predatory pricing to take place as the prospect to recuperate losses through earning monopoly rents is fictional. The purchase of airline industry is considered as an expansive transaction as it costs thousands of dollars. The willingness to pay for a ticket on a specified route differs from customer to customer. The Trans-Tasman Air Travel Market is an oligopoly market is characterized by the second-degree price discrimination. The competitive action in airline pricing emerges to be focused on exploiting the possibilities of the second form of price discrimination. In this case, surplus is extorted by attaching clauses to tickets. A model related to airline pric ing for a flight indicates a plane flying a particular route at a particular date. MV = 1 Q where MV is considered as the maximum enthusiasm to pay of the Qth keenest customer (Fudenberg Tirole, 2013). It can be concluded that the purchase of airline industry is considered as an expansive transaction as it costs thousands of dollars. References Duval, D. T. (2013). Critical issues in air transport and tourism.Tourism Geographies,15(3), 494-510. Fudenberg, D., Tirole, J. (2013).Dynamic models of oligopoly. Taylor Francis.