How Oligopoliies limit competition from from rivals.
Not what you're looking for?
Oligopolistic firms in the US try to limit competitions from their rivals. I provide a discussion on the interdependence of firms in oligopoly and how this affects firm behavior. I introduce the kinked demand curve model and discuss two ways that firms compete. One involves non-price competition through advertising and the other involves deterring would be competitors by building excess capacity. I provide a game theory framework for modeling the firms decisions.
Purchase this Solution
Solution Summary
A discussion on oligopoly theory and two ways in which oligopolistic firms limit competition from their rivals.
Solution Preview
The key feature of Oligopoly is that firms actions affect the profitability of other firms. One way to model oligopolists is with the kinked demand curve model. This is the most prominent approach in principles texts. Within the kinked demand curve model if one firm lowers its price others will as well. In the end all firms lose profits. However if one firm raises prices others do not follow suit and therefore steal market share away from the price raising firm. In this setting firms often pursue non-price competition. Firms might instead ...
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.