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Theme 3
Market Structures
3.4.4 - Oligopoly
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Created by
Saberie Mohammad
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Cards (12)
What is the definition of oligopoly?
A
market structure
with few
interdependent
firms
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How do firms in an oligopoly influence market prices?
They can influence prices due to
interdependence
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What are the barriers to entry in an oligopoly?
High
barriers to entry
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What is the market share of the top firms in an oligopoly?
At least
60%
market share
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What are the key features of an oligopoly?
Few
dominant
firms
High
entry barriers
Potential for collusion
Reliance on
non-price competition
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What is non-price competition in oligopoly?
Competition through
advertising
and product differentiation
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How may firms in an oligopoly collude?
Formally through
cartels
or informally through
tacit collusion
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What does game theory analyze in the context of oligopoly?
Strategic
interactions between firms
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What does the Prisoner's Dilemma illustrate in oligopoly?
Why firms may avoid
cooperation
despite benefits
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What type of demand curve do oligopoly firms face?
A
kinked demand curve
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How is the kinked demand curve characterized for price changes?
Elastic
for price increases,
inelastic
for decreases
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What is the summary of oligopoly characteristics?
Few
interdependent
firms
High
entry barriers
Potential for collusion
Reliance on non-price competition
Analyzed using game theory and
kinked demand curves
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