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Oligopoly

An oligopoly is a type of market that has a small number of producers (oligopolists) who dominate the market; typically it is defined as two to eight firms that own at least 80% of the market share. Within the oligopoly, each oligopolist has considerable market power and their own actions will affect the entire market. Consequently, each oligopolist must also take into account the reactions of the other oligopolists to their actions. 

In an oligopoly situation, the firms can choose to either collude or not collude. A formal agreement to collusion is called a cartel and in most countries it is illegal. Under collusion, the firms act together like a monopolist and maximize profits in the same way - by restricting output collectively. Each firm then receives their respective shares of the profits based on their share of the market. But, informal collusions can only be enforced by themselves, and often there is an incentive to cheat and to produce more. This can cause the collusion to fall apart if all the firms take the same action, then there is effectively no restriction on output. On the other hand, when firms don't collude they will act competitively. This will cause the market to behave more like monopolistic competition. Here firms can gain profits through their product differentiation. The price in this situation is typically much closer to social equilibrium

Characteristics of an oligopoly include long run profits, the ability to be price setters, and interdepedence. Firms operate under imperfect competition and will often use non-price competition to acquire greater revenue. An example of oligopolists in Canada are the three companies, Rogers Wireless, Bell Mobility, and Telus Mobility, who share most of the wireless market in Canada.

Dominant Strategies and Nash Equilibria in a 2x2 Game

Consider the following two person game, between A and B.              hold Not hold    drive        X, 2          3, Z    stop       10, Y          2, 6    (a.) Given an example of values for X, Y and Z so that 

Nash equilibrium and dominant strategies

 Consider the following strategic form game.  B               sell not sell A new    3, 1          3, 2  old      12, 8          1, 3    (a.) Determine whether A and/or B have a dominant strategy.    (b.) Find a

Strategic Behavior Oligopolies

Scenario An interesting example of strategic behavior comes from a 1997 article about Microsoft's investment in Apple (New Straits Times, 1997). The article is included in the Required Readings list. Facing tough anti-trust scrutiny from government agencies, Microsoft provided financial support to Apple in order to ensure Apple

Market Structure Classification

Is Publix a monopolistic competition, oligopoly, monopoly, or perfect competition? Justify your classification of the firm and use the characteristics/features of the different market structure to determine which market structure to classify Publix.

Four Market Models: Walmart

What four market models does Walmart fall under? Pure competition Oligopoly Monopoly Monopolistic competition

Oligopoly Market Structure: Price Fixing in an Oligopoly

Testifying at a price fixing trial involving Cargill Corp. and the market for chicken growth hormone, (in which the Cargill is one of only three firms worldwide), an executive for Perdue said: "It's an oligopoly. When one (firm) changes price, they all do... usually within minutes." Why is it not surprising to find that in a

Oligopoly/Monopolistic Competion

Which of the following industries would you classify as an oligopoly? Which would you classify as monopolistically competitive? Make sure in your answer to relate it to the characteristics of the market structures. Explain your answer. If you are not sure, what information do you need to know to decide? a.) Athletic shoes b

The Soft Drink Industry as a Type of an Oligopoly

Use the Internet to research an oligopoly. Describe the oligopoly you researched and explain what makes it so. Assume that a very competitive start-up enters the market in direct competition with the oligopoly you described, initially gaining a 12% market share. Discuss the steps the oligopoly should take to address this new

Market structures

Markets: Perfect competition, monopoly, monopolistic competition, oligopoly. 1- Give a specific example for each ( US Companies ). 2- Which one is better market from the stand point of producers? 3- Which one is better market on the stand point of consumers?

Differences in Advertising Between Competition and Oligopoly

1. Consider some of the products that are widely advertised on television. By what kind of firm is each produced a perfectly competitive firm, an oligopolistic firm, or another type of firm? How many major products can you think of that are not advertised on TV? 2. In what ways may the small retail sellers of the following pr

Increasing-Cost Industries, Antitrust Legislation, and Game Theory in Oligopoly

1. Suppose you own a home remodeling company. You are currently earning short-run profits. The home remodeling industry is an increasing-cost industry. In the long run, what do you expect will happen to a. Your firm's costs of production? Explain. b. The price you can charge for your remodeling services? Why? c. Profits in h

Market Structure and Returns

In the hope of high returns, venture capitalists provide funds to finance new (start up) companies. However, potential competitors and structures of the market into which the new firm enters are extremely important in realization of profits. Among different market structures, which one do you believe provides the highest possi

Applied Economic in Business

Maximizing Profits Within Markets Paper - The Walt Disney Company Summarize the differences between the four market types. Provide a general explanation of how business may maximize profit within each market type.

Oligopoly for Inverse Functions

Consider an oligopoly in which the inverse function p(?xi) = a - b ?xi, a, b > 0, and each firm's costs c(xi) = cxi, 0 < c < a. First, given n, determine the Cournot-Nash equilibrium outputs, profits, deviation of price from marginal cost, and deadweight loss. Then prove that all of these approach zero asymptotically as n tends

Pricing and Output Decisions in an Oligopoly

Assume you are the manager of Yabba Cable Company, which provides commercial communication services to the town of Canyon Lake, Texas. Because of licensing restrictions in the market, only your company and two others (Dabba and Zabba) are allowed to operate in this market. The three companies decide to form a cartel and divide t

Revenue and Profit Maximization Under Oligopoly PLEASE HELP

I hope you ll can help I just don't understand this. I have attached the problems. Revenue and Profit Maximization Under Oligopoly An oligopolist, the Bramwell Corporation has estimated its demand function and total cost functions to be as follows: Q = 25 - 0.05P TC = 700 + 200Q Answer the following questi

Business case type -- changes in supply, price

The opening statement on the website of the Organization of Petroleum Exporting Countries (OPEC) states, â??â?¦ OPEC´s eleven members are all developing countries whose economies are heavily reliant on oil export revenues. They therefore seek stable oil prices that are fair and reasonable for both producers and consumers of

Oligopoly and monoplistic competition

1 The demand equations for airplane trips for business travelers and vacationers are P = 600 â?" 0.2QB and P = 200 â?" 0.05QV, respectively. Assume that the airline can serve an extra passenger with no extra cost. (a) If the airline company has to charge a single price to all passengers, what are the profitmaximizing price,

Examples of competitive markets

What are some real-life examples of monopolistically competitive, oligopoly, and monopoly markets? Please answer these questions in your own words and five one example of each.

Pay off table Economics

Need assistance with the following question (attached word file) 1. Alpha and Beta, two oligopoly rivals in a duopoly market, choose prices of their products on the first day of the month. The following payoff table shows their monthly payoffs resulting from the pricing decision they can make. Alpha's price High

Basic Oligopoly Models

The opening statement on the Web site of the Organization of Petroleum Exporting Countries (OPEC) says, "... OPEC's eleven members are all developing countries whose economies are heavily reliant on oil export revenues. They therefore seek stable oil prices that are fair and reasonable for both producers and consumers of oil." T

Solving a profit maximization

Suppose a firm in an oligopolistic industry faces the following demand curve: P = 4,900 - 2 Q for Q < 10,000 P = 20,000 - 0.6 Q for Q > 10,000 Suppose further its Cost function is as follows: TC = 1,000 + 100Q +.5 Q2 a. What price do you suppose they will charge in the short run? b. What do you suppose will happe

pharmaceutical industry's market structure

Which market structure is best suited for a pharmaceutical industry (perfect competition, monopolistic competition, monopoly and oligopoly) If the industry decided to operate under one of the other three remaining marker structure, how would equilibrium price and equilibrium quantity differ? Would it be higher, lower, the sa

OLIGOPOLY & MONOPOLISTIC COMPETITION, PRODUCT DIFFERENTIATION

6. Untied and Air 'R' Us are the only two airlines operating flights between Collegeville and Bigtown. That is, they operate in a duopoly. Each airline can charge either a high price or a low price for a ticket. The accompanying matrix shows their payoffs, in profits per seat (in dollars), for any choice that the two airlines