Oligopoly Market Structure - 2237 Words

Oligopoly Oligopoly is a market structure in which the number of sellers is small. Oligopoly requires strategic thinking, unlike perfect competition, monopoly, and monopolistic competition. †¢ Under perfect competition, monopoly, and monopolistic competition, a seller faces a well defined demand curve for its output, and should choose the quantity where MR=MC. The seller does not worry about how other sellers will react, because either the seller is negligibly small, or already a monopoly. Under oligopoly, a seller is big enough to affect the market. You must respond to your rivals’ choices, but your rivals are responding to your choices. †¢ In oligopoly markets, there is a tension between cooperation and self-interest. If all the†¦show more content†¦Jack does not care that Jill’s output is sold at a lower price. The price effect is smaller for duopoly than monopoly, and the quantity effect favors more output whenever price is above marginal cost. Therefore, the Nash equilibrium price will be closer to marginal cost than the monopoly price. The more firms in the oligopoly, the smaller the price effect will be, and the lower the Nash equilibrium price. When the number of firms approaches infinity, the price effect approaches zero. Therefore, each seller will increase output whenever the price is above marginal cost. In the limit, we have the perfectly competitive price, and the socially efficient quantity. A Brief Introduction to Game Theory Game Theory can be used to study oligopoly games other than the â€Å"quantity competition† game played by Jack and Jill, as well as arms races, voting games, bargaining games, and so on. A Game is defined to be: †¢ A set of players †¢ A set of possible strategies for each player, †¢ A payoff or outcome function that assigns payoffs to each player for each combination of strategies (one strategy for each player). The Prisoners’ Dilemma Bonnie and Clyde are caught with illegal weapons (1 year sentence), but are suspected of bank robbery. Interrogated in separate rooms. If both remain silent, one year each. If one confesses, and testifies against the other, he or she will get immunity and the other gets 20 years. If both confess, their testimony isShow MoreRelatedOligopoly Market Structure2723 Words   |  11 PagesRunning Head: Marketing Structures Toyota as an example of an oligopoly market structure Name: Institution: Instructor’s Name: Course code: Course Title: Contents Contents 2 Toyota as an example of an oligopoly market structure 3 1.0 INTRODUCTION 3 1.1 Terminologies of market structures 3 1.11 Perfect competition 4 1.12 Monopoly 4 1.13 Monopolistic competition 4 1.14 Oligopoly 4 2.0 THE TOYOTA COMPANY 5 2.1 Characteristics of an Oligopoly 6 2.2 Toyota Motor Company’sRead MoreMarket Structure of Oligopoly 1755 Words   |  8 PagesAnalyse The Structure Of The Market Structure Of Oligopoly And The Difficulty In Predicting Output And Profits Market structure of oligopoly Oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industrys output can affect competitors. Examples of oligopolistic structures are supermarket, banking industry and pharmaceutical industry. The characteristics of the oligopoly are: • SmallRead MoreMonopolistic and Oligopoly Market Structures2166 Words   |  9 PagesIntroduction – Market structures and cases under study Definition - The interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market. Market structures under study are ones which are more pronounced than others in the real world i.e. ‘Monopolistic competition’ and ‘Oligopoly’. Very few markets in realRead MoreEconomic Analysis of an Oligopoly Market Structure1715 Words   |  7 Pages1. Introduction 1a. Article Summary In this article Michael Baker discusses the livelihood of small retailers in a market subjugated by the financially dominant oligopolies, Woolworths and Coles. While the small independent retailers in direct competition with Woolworths and Coles provide some competitive respite for consumers, as they encourage competitive pricing, albeit predatory pricing, it is clear that Woolworths and Coles control the supermarket industry in Australia, in the formation of aRead MoreThe Market Structures, Monopolistic Competition, Oligopoly And Monopoly1507 Words   |  7 PagesIntroduction A market is a dynamic and restless institution where commercial dealing between buyers and sellers takes place. There are many companies and businesses that run the market. According to how the firm functions and other factors like the number of competitor firms and the type of products produced, the firm is classified into a particular market structure. The other competing firms in the market structure affect the pricing strategies of a particular firm in the same industry. Based onRead MoreMarket Structures : Perfect Competition, Monopoly, Monopolistic Competition And Oligopoly2078 Words   |  9 PagesExecutive summary The main purpose of this report is to introduce four market structures – perfect competition, monopoly, monopolistic competition and oligopoly, and their determinations of price and output. It also discussed the possibility for firms to generate profits in the short-run and/or in the long-run within these four market structures. It will be shown in the discussion that both monopolistic and oligopolistic firms are able to generate profits in both short-run and long-run, while firmsRead MoreReflection Paper1607 Words   |  7 Pageslearning team began discussing the topic of market structures. According to our readings, there are four different types of market structures such as pure competition, a pure monopoly, a monopolistic competition, and an oligopoly. Each one of these market structures are diverse in definition, characteristics, and in application, which will be further explained later in detail. We had learned that each one of these four market structures can be applied to businesses, organizationsRead MoreInside Mass Trading By The Nearby Chairman1320 Words   |  6 Pagesto outwardly analyze the sundry business structures. My part is to give dissection and answers to these principal inquiries that will profit the chairman comprehend the structures of a number of the organizations in his city. With a specific end goal to short the leader, I was given the errand to examine the different business structures and qualities of every that will be examined in incredible detail alongside samples of the sundry business structures. Different focuses that will be examinedRead MoreMarket Structure Of The Company Essay1088 Words   |  5 PagesMarket Structure Introduction There are four types of market structures and they are monopoly, perfect competition, monopolistic competition, and oligopoly. What is a market structure? A market structure is â€Å"the makeup of the companies operating in a particular market.† Why is the market structure important to the producer as well as the consumer? It distinguishes the difference in seller numbers, buyer numbers, seller entry barriers, and buyer entry barriers. The main differences in market structuresRead MoreCompetition and Markets Module 5 SLP800 Words   |  4 Pages Competition and Markets Module 5 SLP Name: Institution: Competition and Markets Module 5 SLP The firm to be addressed in this case is Travelodge. It is a franchise firm which was founded by Scott king in the year 1939 and later began franchising in the year 1966. It offers exceptionally high quality products and services. In addition to its services, it is committed in its work, enabling it to acquire world-class attention and everybody interested to know more about it and also experience