OP Gauba & (Other) Political Science Optional Books: post #88 — TG.ME

🏆Oligopoly🏆 An oligopoly is a market form wherein a market or industry is dominated by a small group of large sellers (oligopolists). 👉Oligopolies can result from various forms of collusion that reduce market competition which then typically leads to higher prices for consumers. Oligopolies have their own market structure. 👉With few sellers, each oligopolist is likely to be aware of the actions of the others. 👉According to game theory, the decisions of one firm therefore influence and are influenced by decisions of other firms. 👉Strategic planning by oligopolists needs to take into account the likely responses of the other market participants. 👉Entry barriers include high investment requirements, strong consumer loyalty for existing brands and economies of scale. 👉In developed economies oligopolies dominate the economy as the perfectly competitive model is of negligible importance for consumers. 👉Oligopolies differ from price takers in that they do not have a supply curve. Instead, they search for the best price-output combination. 🏆Characteristics 👉An oligopoly maximizes profits. 👉Oligopolies are price setters rather than price takers. 👉Barriers to entry are high.The most important barriers are government licenses, economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. 👉"Few" – a "handful" of sellers. There are few firms so that the actions of one firm can influence the actions of the other firms. 👉Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits. 👉Product may be homogeneous (steel) or differentiated (automobiles). 👉Oligopolies have perfect knowledge of their own cost and demand functions, but their inter-firm information may be incomplete. Buyers have only imperfect knowledge as to price, cost and product quality. 👉Oligopolies tend to compete on terms other than price. Loyalty schemes, advertisement, and product differentiation are all examples of Non-price competition. Credit : Wikipedia