oligopoly

Assumptions Perfect comp. Monopolistic comp. 0% Low concentration 50%

Few dominate the industry Many or not does not matter, domination Concentration ratio- CRx X is the number of large firms Example- Cr4 is 90 on beer companies Meaning 4 companies make 90 % of booze Oligopoly monopoly Medium concentration 80% High concentration Some make almsot the same goods, some are very differnent Most hard barriers to entry like high scale of production and branding Interdependance Small number of firms controling the industry Collude- act togehter as a monoply Also compete vigourously for market share Prics change far less, even when production costs change firms leave their prices unchanged Firms

Collusive and non collusive

Firms act togehter as a monoply and share profits Formal- firms offically agree on a price A cartel Illigal in most countries as is against the interest of the people Fines and punishments Opec, world oil prices Tacit collususion, when firms change their prices simply by looking at other firms prices, no comuniation need to take place. Monopoly graph Try to keep prices stable in order to keep the situation going Non collusive firms, compete and are aware of eachothers actions Game theory is the optimum strategy that a firm could undertake in tge light of other firms decisions for example: Dont advertize Advertize Dont advertize Both make 4 million Firm a gets 8 million Firm b gets 2 million Advertize Firm a gets 2 million Firm b gets 8 million Both get 3 million firm a firm b kinked demand curve The firm only knows one point on its demand curve if the firm raises their price alot of demand would be lost if the firm lowered their price then the other firm would lower theirs too show price rigifity in a non collusive olygopoly firms are afraid to raise prices firms are afraid to lower markets the shape of the mr curve means that if marginal cost were to rise then it is possible that mc equals mr and so not chang ethier prices or outputs non price comp. brand names, packaging, special features and ads etc. huge expeditures on ads misuse of resources but also greater choice unilever amd procter and gamble own many things, many industries