This document summarizes the characteristics of an oligopoly market structure. Key features include there being a small number of large firms dominating the market, barriers to entry that allow firms to charge high prices, and firms making interdependent pricing decisions based on how their competitors will react. The document also describes the kinked demand curve theory oligopolies use to determine pricing, where firms will not change prices if a competitor increases them but will match a price decrease to avoid losing revenue.
Deep - Nature of Market/Free Competition/Monopoly/Intro to Oligopoly Sami - Determining Costs/Revenue/Profits Jo - Introduction and Conclusion
Demand is perfectly elastic: If there is a firm with a different price, the consumers will got that firm because of the perfectly elastic tendencies of the demand
2. a large % of the market is taken up by the leading firms
3. ANy action taken by one major firm will have immedite repercussion on the others. Because they dont have total control of the market but large enough to affect output and price.
3. ANy action taken by one major firm will have immedite repercussion on the others. Because they dont have total control of the market but large enough to affect output and price.
To maximize profit, go to point MR=MC Price determined on demand curve Unit cost on the total cost curve Equate price and marginal cost (Mutual interdependence) Firm's profit depends on price and sales of rivals
1. enable them to earn normal profits and result in lesser exploitation of customers 2. results in better products, better customer service and more innovation in terms of customer satisfaction 3. Supports high entry barriers 4. increaed competitiveness by joining of two or more companies. Enjoy economic benefits.
3. Agreeing on quotas will imit supply and drive up the market price. There are strict regulations to this. Since it is illegal, it doesnt last too long as firms will not be forced to follow. All is needed for one firm to sell below or above the set price for it to break down.
3. Agreeing on quotas will imit supply and drive up the market price. There are strict regulations to this. Since it is illegal, it doesnt last too long as firms will not be forced to follow. All is needed for one firm to sell below or above the set price for it to break down.