oligopoly

• what is an oligopoly?

  where few 5 or less dominate the market with market share of at least 60%
• what are the 4 characteristics of an oligopoly ?

  • high barriers to entry and exit
  • interdependance
  • high concentration ratio
  • product differentiation
• what is collusive behaviour ?

  in oligopolies occurs when firms cooperate to fix prices & restrict output
• what is non collusive behaviour?

  occurs when firms actively compete to maintain/increase market share
• what are the two types of collusion ?

  overt and tacit
• what is tacit collusion ?

  collusion done secretly and illegalyoccurs when firms avoid formal agreements but closely monitor each other's behaviour usually following the lead of the largest firm in the industry
• what is overt collusion ?


  collusion done out in the open
• evaluation of oligopoly ?

  • Where there is collusion, it is likely that firms will earn abnormal profit and consumers may be exploited, as prices will be higher than in a market where the firms compete.
  • If there is collusion, there will be less incentive to reduce costs and less productive efficiency.
  •  dynamically efficient if they earn abnormal profit and face significant competition from rivals. They will have resources to invest in new products and technologies and have the incentive to inovate.