industry where a single firm dominates the market. However, these are
typically owned by provincial governments. Local telephone, cable, and
Internet providers may have some local monopoly power, but are subject
to significant government regulation. More common in developed
economies are industries where a few very large firms dominate the
market. This is certainly true in Canada, where many such industries form
a significant part of the economy and are not well described by the model
of monopoly.
The theory of oligopoly helps us to understand these industries in which
there are a small number of large firms, each with considerable market
power, and that compete actively with each other. These firms are well
known to most of us. The grocery business is dominated by a few large
firms—Loblaws, Metro, Sobeys, and Walmart. The life insurance business
is dominated by Sun Life, Great West Life, and Manulife; the railway
industry has two dominant firms—Canadian Pacific Railways and -
Canadian National. The Canadian airline industry is dominated by Air
Canada and WestJet. Many industries that used to be dominated by small,
independent firms have been transformed in recent years by the
development of large, world-wide firms. This is especially true in the
accounting, engineering, management consulting, and law professions.
All of these firms have market power but still compete actively with their
rivals.
Industrial Concentration