This companies own all or nearly all the market

 

This study is about formation of monopolies in a bipartite market.  Monopoly is a market structure characterized
by a single seller, selling a unique product in the market.

In a monopoly market, the seller faces no competition, as he is the sole
seller of goods which no close substitute.

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A bipartite market can be understood as a duopoly which is a specific
type of oligopoly where only two producers exist in a market. A duopoly is a
situation in which two companies own all or nearly all the market for a given
product or service.

This study is trying to explain how monopoly takes place in a
duopolistic market. Our paper is stating that a situation of duopoly can exist
within a market (two brands competing which each other) but time span will
determine which brand will dominate the market until it changes it into a
monopolistic market.

Companies may have two options, switching to the brand which is highly preferred
in the market or upgrading its current brand.

That is what our study will be about and what we will try to deeply
explain in the following lines.

Our study is using a technique called agent-based models. An agents
based model is a class of computational models for stimulating the actions and
interactions of autonomous agents both individual and collective entities such
as organizations or groups which a view to assessing their effects on the
system as a whole.

We focus on industries where there is a large number of companies that
have access to a limited number of technology and where the success of the
company is directly related to the adoption of one of that product.

Industry of mobile phones was the example used to illustrate the study. There
are many manufacturer of mobile phones nowadays but the choice is very limited
when it comes to the operating system. 
Today we find basically (excluded iPhone from this study) only two
operating system which are Android and windows mobile.

We’ve assumed that companies can choose only one of the two brand at
time and there is no other brand for the same product as we have shown it with
the two operating system.

All products have a certain cost and the companies select a brand based
on the benefits that it will receive. Another factor that can influence a
company decision is the technology used by its competitors.

No company wants to be behind its competitors and technological
innovation can determine a company’s competitive advantage.  Thus for a company especially mobile phone as
it is in this case, to remain competitive it is important to consider the
technological innovation factor.

Model
description

As we said earlier, this paper is using the model called agency based
model. It is considering eight companies that are neighbors of a central one
and all are interacting with each other. Considering our example of Operating
system, each of the company is using either Android or Windows mobile.

If Android is attracting more customers let’s say because it is using a more
advance technology, other companies using Windows mobile operating system will
want to switch to Android OS, but this will not be without any cost.

So, before the company take any decision, it should first answers these
questions:

·        
Which operating system is the most used by competitors?

·        
What will be the cost if the company choose to switch
to another brand?

·        
What will be the cost if instead of switching to
another brand, the company decide to upgrade its current operating system?

Keeping in mind that a company is more competitive with better
technology, yet the company will always choose the most efficient option with
the least cost. As most of the neighbors companies switch their choice of
operating System for the same reason which is the taste of customers toward one
specific brand, all company including those who were seeking to upgrade their
operating system will have no choice than switching to a brand with more
competitive advantage.

What will happen is the tendency of most of the companies to completely
switch their operating system. This is what we are observing today between
Android operating system and Windows mobile operating system. Android is
dominating the market and turning it into a monopoly. Android operating system
has been able to accomplish such thing because it started growing earlier by
high technological innovation. Thus it has been able to attract more customers
in it beginning and by focusing on technological improving it has maintain its
growth in the mobile phone market.