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AP Economics

AP Economics. Mr. Bernstein Module 66: Oligopoly in Practice December 13, 2013. AP Economics Mr. Bernstein. Oligopolies in Practice Antitrust legislation has made collusion uncommon Several factors limit tacit collusion

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AP Economics

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  1. AP Economics Mr. Bernstein Module 66: Oligopoly in Practice December 13, 2013

  2. AP EconomicsMr. Bernstein Oligopolies in Practice • Antitrust legislation has made collusion uncommon • Several factors limit tacit collusion • Product Differentiation, Price Leadership and Non-price competition are more attractive strategies • The prevalence of Oligopolies makes understanding their decisions important, though difficult to model

  3. AP EconomicsMr. Bernstein Factors Limiting Tacit Collusion • Large number of firms in an industry • More competitors, more likely one “doesn’t get it” • Complex products and pricing schemes • Harder to keep up with whatever the tacit agreement is • Differences in interests • Firms may have differing strategic goals (geographic expansion, balance sheet issues, timeframes, personal goals of corporate leaders) • Bargaining power of buyers • Oligopolies often sell into distribution chain which is highly competitive market (ie breakfast cereal)

  4. AP EconomicsMr. Bernstein Alternative Strategies to Tacit Collusion • Product Differentiation • Price Leadership • Once in place, is a form of tacit collusion • Non-Price Competition • Price, Quality, Service… “choose any two”

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