Week 8 Flashcards
(11 cards)
Oligopoly features
few sellers
interdependent firms
prices are set above marginal cost
What happens when they act as a monopoly
maximises profits for the group
increase firm profit at other expenses
Duopoly
Only two members eg; water utility
Collusion
Agreement among other firms in a market to produce or price to charge
Cartel
Group of firms acting in unision
Why can’t they act as cartels
Competition laws prohibit explicit agreement among oligopolists due to public policy
Nash Eq
Each player chooses their best strategy
Self interest
generates price war
Effect of increasing number of sellers
Oligopolist market will look like a competitive market
price approaches marginal cost
the quantity produced approached the socially efficient level
Oligopolies are a type of ….
Prisoners dilemma; Self-interest makes it difficult for the oligopoly to maintain a cooperative outcome with low production, high prices and monopoly profits.
Public policy towards oligopoly
Cooperation is deemed not wanted by society because production will be too low and pries will be too high