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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.

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

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

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

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.

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,

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


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

Market Structure of the LoJack company

I need approximately 100 words on the market structure of LoJack. My basic question is; is the company a monopoly, perfect competition, oligopoly, etc and why. I'm not sure if the company is a monopoly or oligopoly. There is a patent on the their product which is a characteristic associated with a monopoly but they do hav

Cali Drug Cartel Marketing Analysis

The Cali Drug Cartel The drug cartel based in Cali, Colombia, is the largest organization in the multibillion dollar worldwide cocaine industry. Using coca leaves purchased from Bolivian, Peruvian, and Colombian farmers, the cartel processes these into powdered cocaine. Much of the product is shipped to the U.S. by sea


Please answer the following questions based on the articles 1. Discuss how the theory of cartels and joint profit maximization presented in this chapter applies to the behavior OPEC? (page 269 on Attachment) 2. (A) Describe how the ice cream industry fits the oligopoly model (B) How does the government influence o

Oligopoly pricing

On Waikiki Beach, there are two hotels, Weird and Bizarre. The practice of guaranteed price matching is illegal. If the two firms act independently (they do not engage in price fixing or any other collusive behavior), each firm will rent 50 rooms per day at a price of $50 per room and an average cost of $45 per room. Under a

Differentiating between Market Structures

Identify the market structure of McDonalds and evaluate the effectiveness of this structure for McDonalds. Please be sure to provide me the reference and/or article you use.

Basic Oligopoly Models - Ford

Ford executives recently announced that the company would extend its most dramatic consumer incentive program in the company's long history - the Ford Drive America Program. The program provides consumers with either cash back or 0 percent financing for new Ford vehicles. As the manager of a Ford/Lincoln/Mercury franchise, how

The four-firm concentration ratio

The four-firm concentration ratio a. indicates the total profitability among the top four firms in an industry. b. is an indicator of the degree of monopolistic competition. c. indicates the presence and intensity of an oligopoly market. d. is used by the government as a basis for anti-trust cases.