• Understand the definition and characteristics of a market that is in oligopoly.
In our Warm Up Activity, the game was a one-shot game. Let’s suppose, however, that oligopolists get to play a similar game over and over again.
• Explain how firms in an oligopoly interact so they can increase profits.
1)
2 firms (D__________________ ). 2)
WHAT IS OLIGOPOLY? Oligopolies share many characteristics with monopolies, but the forces that create oligopolies are not as strong as those that create monopolies. 1)
A Few Large Firms
Suppose the soft drink market is an oligopoly with
Since the game is indefinite, we may expect C_____________________ B______________.
3)
If one firm cheats, the other will also use U________________________ B______________.
4) 2)
Identical OR Differentiated Products
3)
High Barriers to Entry
4)
Interdependence
ECONOMICS
Acting cooperatively (C________________ ) achieves maximum long run profits.
Although collusion will almost certainly produce more profits for each oligopolistic firm, it is unclear whether they will collude or if they will compete.
Even though formal agreements to collude are illegal, oligopolists may still engage in tacit collusion, which is an informal understanding to cooperate.
1)
1)
Colluding Oligopolists A)
B)
2)
The strongest collusion is a C__________, a formal agreement to cooperate. 2)
Cartels, or trusts, are not legal in
B)
If an oligopoly has any of these characteristics, however, tacit collusion is more difficult.
the U.S. due to A____________ L______.
A)
Large Number of S____________
Oligopolists may compete by increasing production, which is called Cournot Behavior.
B)
Differentiated P______________
C)
Different Sized F________
D)
Large Sized B__________
Competing Oligopolist A)
Tacit collusion is the N_________ for most oligopolies.
Oligopolists may compete by reducing price, which is called B________________ Behavior.
THE KINKED DEMAND CURVE If we assume an oligopoly is operating under tacit collusion, it can be graphically represented as a kinked demand curve. 1)
2)
3)
The tacit collusion price and output are located on the “kink.” Demand is steep to the right. A)
More output and a lower price will be matched by other firms.
B)
If all firms do this, it leads to a small gain in sales for each firm.
Demand is flat to the left. A) B)
Less output and a higher price will not be matched by other firms. If just one firm does this, it leads to a large reduction in sales.
OTHER CHARACTERISTICS
2)
Oligopoly is a very unpredictable market structure, but here are a few more characteristics that may exist in oligopolies.
If collusion breaks down, firms engage in a p__________ w________, slashing prices down to competitive levels.
3)
It is generally better to get new customers with non-price competition, such as A__________________.
4)
This can result in product differentiation -- consumers think your products are different!
1)
P____________ L____________________ is when one large firm changes price first and the other firms follow.
Retrying... Download. Connect more apps... Try one of the apps below to open or edit this item. Oligopoly Strategy.pdf. Oligopoly Strategy.pdf. Open. Extract.
Feb 27, 1998 - employment level or other forms of pay like workers' participation schemes. .... a Call to strike concerns only one establishment b Monthly ...... bosch, Center for Operations Research and Econometrics, Catholic University.
We show that the set of the Cournot-Walras equilibrium allo- cations coincides with the set of the Markov perfect equilibrium allocations of the two-stage game outlined above. This theorem strengthens the result obtained by Busetto and Codognato (200
Retrying... Download. Connect more apps... Try one of the apps below to open or edit this item. 4 - Oligopoly and MC (Key1).pdf. 4 - Oligopoly and MC (Key1).pdf.
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OLIGOPOLY EXPERIMENTS IN THE CURRENT. MILLENNIUM. Jan Potters and Sigrid Suetens. Tilburg University, CentER, TILEC. Abstract. We present a general overview of papers that employ laboratory experiments to study oligopoly markets. We focus on papers t
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