The Law Of Diminishing Returns Essay
Deloitte operates in an oligopolistic market structure. In Fundamentals of Managerial Economics, Hirschey (2009) explains that “In oligopoly markets, a large percentage of the overall market is taken up by a few leading firms” (Hirschey, 2009, pg.509). The accounting services industry is mainly dominated by four companies: Deloitte Touche Tohmatsu, PricewaterhouseCoopers, Ernst & Young, and KPMG. These companies are known as “the big four”. The Big 4 Accounting Firms, a website that specifically provides information about these firms, states that “These firms completely dominate the industry, auditing more than 80 percent of all US public companies” (The Big 4 Accounting Firms, n.d.). These four companies dominating 80% of the accounting services industry is indicative of them being an oligopoly.
There are other specific characteristics of oligopoly market structure that Deloitte fits in to as well. The firm is engaged in providing homogenous services, as auditing is a homogenous service, the only difference is the perceived quality. Their cost, pricing and quality information is…