Chapter 16, Part 1

• What is an oligopoly?


  A market structure with a few dominant firms.
• What is a key characteristic of an oligopoly?

  Interdependence among firms.
• Give examples of oligopolistic markets.

  Internet providers, mobile operators, electricity/gas providers.
• What must firms in an oligopoly consider?

  Rivals' reactions in their strategies.
• What is the tension in an oligopoly?

  Between cooperation (to maximize collective profits) and self-interest (to maximize individual profits).
• What is a duopoly?

  An oligopoly with only two members.
• What are the market outcomes under perfect competition, monopoly, and duopoly for two milk producers?

  Perfect Competition: P = MC, Q = 120, TR = 0; Monopoly: P = 6, Q = 60, TR = 360; Duopoly: Can cooperate or act independently.
• What is a cartel?

  A group of firms acting in unison to maximize collective profits.
• What is a challenge for cartels?

  Difficulty in maintaining agreements, legal issues, and individual incentives to cheat.
• What is Nash Equilibrium in an oligopoly?

  A situation where no firm can improve its outcome by changing its strategy unilaterally.
• What happens as the number of firms in an oligopoly increases?

  The market outcome approaches perfect competition (P = MC).
• What is OPEC and what is its aim?


  An international cartel of oil-exporting countries aiming to control oil prices.
• What challenges does OPEC face?


  Members often cheat on production agreements.
• What are the successful periods for OPEC?

  1973-1985 saw significant price increases due to coordinated production cuts.
• What is the Cournot Model in oligopoly?


  Firms compete on quantity and consider the residual demand.
• What is the Bertrand Model in oligopoly?

  Firms compete on price, leading to outcomes similar to perfect competition.
• What is the Stackelberg Model in oligopoly?

  One firm acts as a leader, making decisions first, followed by others.
• What is the aim of public policy toward oligopolies?

  To reduce cooperation among oligopolists to increase production and lower prices.
• What are public policy interventions for oligopolies?

  Antitrust laws and regulations to prevent collusion and promote competition.
• What is the conclusion about oligopolistic markets?

  They exhibit unique dynamics due to interdependence, and understanding these helps in designing effective public policies.