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Chapter 16: Oligopoly

Chapter 16: Oligopoly. Imperfect Market. Imperfect Competition is a market that is neither monopoly, or perfect competition In Imperfect Competition, there are industries that have competitors, but not as much competition. Imperfect Market. There are two main types of Imperfect Competition

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Chapter 16: Oligopoly

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  1. Chapter 16: Oligopoly

  2. Imperfect Market • Imperfect Competition is a market that is neither monopoly, or perfect competition • In Imperfect Competition, there are industries that have competitors, but not as much competition.

  3. Imperfect Market • There are two main types of Imperfect Competition • Oligopoly • Very limited sellers, less competition, selling identical product with each other • Monopolistic Competition • There are Many firms, and has all the characteristics of a competitive market, but selling product similar but not identical

  4. Oligopoly • In oligopoly, there are only few sellers in the market, creating tension between sellers due to Rationalization • All sellers in the market are independent • Sellers are better off if they work together in a cartel, producing less and charging higher price.

  5. Duopoly • Duopoly is the type of oligopoly but with only two firms. • In a Duopoly, each firms takes heed of each other’s production, and price to trust each other.

  6. Duopoly • In Perfectly Competitive market, it is a horizontal demand curve, meaning Price is equal to Marginal Cost which is Zero, and Quantity being any number. • While in Monopoly, they can maximize profit

  7. Oligopoly & Perfect Competition • As I have mentioned, in order for imperfect competition to maximize they can either do one of two things. • Collusion: agreement in the market, to sell their similar products in a certain price • Cartel: group of oligopolist who comes together to act as if they are in monopoly • Yet the anti trust laws exists to prevent this kind of activity

  8. Nash Equilibrium • Nash Equilibrium usually exists in oligopoly, when people in economical means will pick a certain strategy which is best for them.

  9. Quantity input control • Increasing the number of Input in the market will change various things in the market. • Because P is greater than MC, it would profit the firm to selling more at the current price • But when production rises, it will cause huge supply, causing the price to drop

  10. Market Size • As the market grows, oligopoly will start looking much like the competitive market • As the price comes to equal the MC, will approach the socially efficient level.

  11. Oligopoly Graph

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