3.4.4 Oligopoly

Question 1

Oligopoly Definition

Answer 1

A few Large firms with ability to control the market

Question 2

Oligopoly Characteristics

Answer 2

High Barriers to Entry and Exit
High Concentration Ratio
Interdependence of Firms
Product Differentiation

Question 3

Concentration Ratio

Answer 3

Shows the Percentage of market share a number of specific firms have

Question 4

Collusive behaviour

Answer 4

When firms cooperate to fix prices & restrict output

Question 5

Non-collusive behaviour

Answer 5

when firms actively compete to maintain/increase market share

Question 6

Reasons for Collusion

Answer 6

Few firms/competitors
Similar costs
Similar revenue
High barriers to entry
Ineffective regulation
Brand loyalty

Question 7

Overt collusion

Answer 7

When firms explicitly agree to limit competition or price-fix

Question 8

Tacit collusion

Answer 8

avoid formal agreements but monitor each other’s behaviour usually following the lead of the largest firm in the industry

Question 9

Cartel

Answer 9

When groups of firms providing the same/substitute products join together to limit output and raise prices

Question 10

Game Theory

Answer 10

used to ensure optimal decisions are made where there’s a high level of interdependence

Question 11

Price Competition in Oligopoly Markets

Answer 11

Price Wars
Predatory Pricing
Limit Pricing

Question 12

Types of Non Price Competition in Oligopoly Markets

Answer 12

Branding
Packaging
Sponsorships
Loyalty Rewards