The Soda Oligopoly


Pepsi and Coca-cola are key examples of an oligopoly. As we were taught in class, an oligopoly is a market form where a market or industry is dominated by a few large companies. For sodas, the products are very similar, yet slightly different. There are these two major brands that dominate the soda industry, making it an oligopoly. Coca Cola and Pepsi are both versions of cola, with slightly differing tastes, and both have the same appearance as a dark brown liquid. They are considered perfect substitutes for each other by consumers because of their similar taste and appearances. Since they are perfect substitutes, the price elasticity demand should be perfectly elastic, but there are actually additional factors that result in a fairly elastic demand. If one of the brands raised their prices, consumers will choose to switch to the other brand since they are perfect substitutes.

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