Monopolistic behavior of facbook, is it a monopoly - Essay Example

3). A monopoly refers to a market with only one seller of a particular good or service. A monopoly is characterized by a single seller in the market and, therefore, no competition. In connection to this, the seller makes abnormal profits as a result of market domination. Abnormal profits are realized because there are many buyers in the market, and the seller is the price maker. Moreover, the seller controls the good or service prices in that market; there is information asymmetry; consumers do not have complete information; the product does not have close substitutes and there are barriers to entry.

(Sexton 332) An oligopoly is a market that is dominated by few sellers. It has two to ten firms in the business competing with each other. Oligopoly mostly results from collusion where several firms come together to form a single firm and, therefore, reduce competition. Oligopolies compete on the basis of prices, technological innovation, quantity, reputation, or advertising. Oligopolies are characterized by few firms in the business such that the actions of one firm influence those of another.

The products may be homogenous or differentiated; there is non-price competition where firms compete on other terms apart from prices including differentiated products, loyalty schemes or advertisement; oligopolistic firm are so large that their individual actions affect the market conditions; the firms have perfect information, but buyers have imperfect information. (Sexton 332-333). From the description Facebook is not a pure monopoly since there are other firms in the business as twitter, LinkedIn and MySpace among others.

It would be considered a leading oligopoly since collusion and acquisition of other firms has given it an advantage over other social network firms. However given the recent efforts example buying Oculus Rift and WhatsApp there is concern that this