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Oligopoly in Practice

Module. Micro: Econ:. 30. 66. Oligopoly in Practice. KRUGMAN'S MICROECONOMICS for AP*. Margaret Ray and David Anderson. What you will learn in this Module :. The legal constraints of antitrust policy. The factors that limit tacit collusion.

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Oligopoly in Practice

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  1. Module Micro: Econ: 30 66 Oligopoly in Practice • KRUGMAN'S • MICROECONOMICS for AP* Margaret Ray and David Anderson

  2. What you will learnin thisModule: • The legal constraints of antitrust policy. • The factors that limit tacit collusion. • The causes and effects of price wars, product differentiation, price leadership, and nonprice competition. • The importance of oligopoly in the real world.

  3. Antitrust Legislation • Laws including the Sherman Act and the Clayton Act make cartels, collusion, and certain anti-competitive business practices illegal

  4. Factors Limiting Tacit Collusion • Large numbers • The more firms in the industry, the less likely tacit collusion will be successful • Complex products and pricing schemes • It is easier to tacitly agree to keep a price high if the product is simple and there are few ways price can be set. • Differences in interests • If firms have diverse characteristics and interests, it will be more difficult to establish and maintain tacit agreements. • Bargaining powers of buyers • If the buyers of a product have bargaining power, or they operate in a competitive retail environment, tacit agreements to keep prices high are unlikely to succeed. • Sca

  5. Product Differentiation and Tacit Collusion • Product differentiation • Price leadership • Non-price competition

  6. How Important is Oligopoly? • Prevalence in the “real world” • Difficulty of modeling oligopoly firm behavior

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