Oligoploly Flashcards
Name 3 characteristics of an oligopolptic market
- Small number of firms
- Significance barriers to entry
3.independent firms
What is oligopoly
This is where there is a concentration ratio
The combined market share of the biggest firms
What is duopoly?
When the industry is served by 2 firms
Define collusion in duopoly outcome
When a group of companies come together, they agree on an amount to supply and a price
The groups of firm that come together to agree on a price and quantity to supply are define as?
Cartel
Why are cartels and monopolies and cartel interlinked? (2 reasons)
Cartels Carry monopoly reasoning
They are both profit maximising
Why are cartels deemed as unstable?
1 reason
Similar to monopolies their can be cheating
What are the two choices attached to game theory and oligopolists
- Keep agreement and produce agreed amount
- Break agreement and produce more than agreed amount
In oligopoly how is the Nash equilibrium found?
Finding out the best possible results
What is tacit collusion
When there are cartel-like agreements presented in the markets.
Even though no formal agreement is never reached.
Describe the kinked demand curve in simple tacit collusion
2 points
2 producers with the same goods
- if price increases demand is elastic
- if price decreases demand is inelastic
What does an increase in the demand cause in the kinked demand curve
Loss in revenue
What is cournot oligopoly
This when both firms make a decision at the same time
What is the Stackelberg oligopoly
This is when one firms makes a decision and other firms have to move accordingly
How is credibility important in oligopoly
A firm must creditably commit to its decision
- launching a new product
- reputation
