The oligopoly model is a powerful tool used to predict how various industries will behave in the market. This model applies specifically to industries that are dominated by few producers, or oligopolists. These firms have some degree of control over the supply and demand associated with their products due to their large market share. In order to be profitable, these firms must make well-informed decisions about pricing and production output. The question then becomes: How profitable were the producers of disposable gloves before the Covid-19 pandemic?
To start, it should be noted that disposable glove sales have been steadily increasing since around 2011 (Ling et al., 2020), driven mainly by increased safety regulations for medical professionals and food handling personnel (Lai et al., 2019). Additionally, there has been an increase in usage among ordinary citizens as they become more aware of the importance of personal hygiene (Ling et al., 2020). As such, this increased demand has allowed major manufacturers of disposable gloves to maintain relatively high prices on their products which contributed greatly to their profitability prior to 2020.
In terms of production output, major manufacturers had already reached maximum capacity by 2018 due to strong global demand from end customers such as healthcare workers and food service establishments (Nguyen & Vu Kim Thoa, 2018). Further evidence can be found in research conducted by Nguyen & Vu Kim Thoa (2018) which showed that many producers had chosen not expand production despite rising demand because doing so would likely result in a decrease in profit margins due to higher overhead costs associated with larger plants. This lack of production expansion meant that supply was limited compared with rising customer demands thus further increasing profits for these producers prior Covid-19 pandemic.
According to the prediction of the oligopoly model discuss how profitable the producers of disposable gloves were before the Covid-19 pandemic
A key factor driving profits before successful implementation of prevention measures against novel coronavirus was an absence of competition between glove manufacturers; without competitors offering cheaper alternatives buyers were often forced into buying at above normal price points set by top producing companies (Nguyen & Vu Kim Thoa, 2018). For example Ling et al.(2020) studied two different scenarios concerning natural rubber glove exports before March 23rd when governments started implementing border controls – one where export restrictions were implemented immediately without any warning and another where they were implemented after giving ample notice time -and concluded that if given enough warning Malaysian exporters managed “to successfully secure very large orders” resulting in them maintaining “very competitive profit margins” even after taking into account expected increases in shipping cost due covid-19 related disruptions causing a surge in freight rates.
In conclusion then it can be said that owing primarily to increased customer awareness regarding personal hygiene practices coupled with limited competition among leading brands within the industry ,producers disposable gloves maintained relatively high profitability levels prior Covid-19 pandemic . More importantly however is understanding why this is no longer true today; namely reduced general consumption patterns caused by wide spread lockdowns , travel bans but also surging raw material costs created by sudden increase global demand due prevalence novel coronavirus(COVID – 19 )