Non-collusive oligopoly

Question 1

Define non-collusive monopoly

Answer 1

• firms don’t agree formally/informally
• each behave independently
• still aware of each others’ pricing decisions
• strategic behaviour (take rivals’ actions in consideration)
• rigid pricing

Question 2

Rigid pricing

Answer 2

• stable pricing for long periods of time
• when it does change – all firms in industry change tgt
• due to similar reasonings and rational behaviour of firms

Question 3

Why do firms that don’t collude need to be strategic

Answer 3

• take into acct rivals’ actions
• pricing decisions
• if not, will risk lowering revenues and profits
• lead to px instability