An oligopoly is a market with:
Few sellers
Similar products
Example of an imperfect competition
Simplest version is a duopoly with 2 firms and decide the quantity to sell.
They collude to form a cartel and act as a monopoly.
They don't collide for self interest:
Difficult to agree, self interest
Higher quantity, lower price and profit
Nash Equilibrium
Cheating=Pursuing own self interests.
Oligopolists form cartels and they collide over the production and price of goods.
Collusion is an agreement among firms in a market.
Firms act with self interest at a price that maximizes profit.
They use strategies like Nash Equilibrium.
Firms produce more than monopoly and less than competitive.
As number of sellers grow, the more the graph begins to look competitive.
The prisoners' dilemma shows why it is difficult for oligopolies to work.
No comments:
Post a Comment