Oligopoly Pricing Are bigger companies more efficient?

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Presentation transcript:

Oligopoly Pricing Are bigger companies more efficient?

Perfect Competition Monopolistic Competition Oligopoly Monopoly Most competitive Lowest Price Highest Quantity Least competitive Highest Price Lowest Quantity 4 Market Structures 2-8 Firms dominate industry

Oligopoly: Examples Airlines & Commercial Aircraft Manufacturers Automobile CompaniesHardware Stores

Oligopoly Few interdependent sellers Identical or slightly differentiated products difficult to enter or leave market incomplete information varying degree of price control Market Characteristics

Oligopoly Company 1 Company 2 Actions of your competition affect you! INTERDEPENDENCE

Non-cooperative BehaviorCooperative Behavior Should I cooperate? SELF INTEREST? Oligopolies are Interdependent

End Result of Oligopolies Prices higher than perfect competition but less than monopoly Economic profit > 0 in both short run & long run Risk of collusion if firms cooperate to raise prices

Article: Rise of Oligopolies 3 Reasons why Benefits Costs Risk?