Oligopoly Flashcards
(14 cards)
How would an oligopolistic market be classified in general economic terms?
When the top 3-5 firms have at least 60% of the market share.
How can an oligopolistic market be classified in terms of the UK government?
Where thje top 3=5 jugoiskjnfihbw
What are some characteristics of an oligopoly?
Few dominant firms.
Interdependance.
High barriers to entry.
Non-price competition.
Imperfect knowledge.
Price setters.
What is collusion in the market?
When two or more firms work together to set prices or output levels. (This is illegal in many countries)
Why is collusion illegal?
It eliminates potential competition and allows firms to charge consumers much higher prices than needed.
What is cooperation in the market?
Refers to two or more firms working together for a mutual benefit which does not harm the consumer or the market.
Why are oligopolists unlikely to start a price war?
Due to the interdependance of firms, and starting a price war can threaten damaging revenue and profits for all major firms.
What non-price competition methods do oligopolists use?
Building brand loyalty.
Research & development.
Product differentiation.
Innovation.
Marketing.
Why do oligopolies use non-price competition?
Because they can differentiate their products without changing price as they are interdependant.
What are the two types of collusion?
Overt.
Tacit.
What is overt collusion?
When firms make an open decision to set prices or output levels for their own benefit.
What is tacit collusion?
When firms make a closed decision to set prices or output levels for their own benefit.
How do you calculate the concentration ratio?
Add x number of firms market share together and present as a percentage.
E.g the 3 firm concentration ratio would be the top 3 firms market share added together.
