Chapter 13
Oligopoly
By Boundless
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An oligopoly - a market dominated by a few sellers - is often able to maintain market power through increasing returns to scale.
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Oligopolies can form when product differentiation causes decreased competition within an industry.
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One important source of oligopoly power are barriers to entry: obstacles that make it difficult to enter a given market.
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Price leadership is a form of tacit collusion that oligopolies may use to achieve a monopoly-like market outcome.
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Firms in an oligopoly can increase their profits through collusion, but collusive arrangements are inherently unstable.
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Game theory provides a framework for understanding how firms behave in an oligopoly.
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The prisoner's dilemma shows why two individuals might not cooperate, even if it is collectively in their best interest to do so.
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The Cournot model, in which firms compete on output, and the Bertrand model, in which firms compete on price, describe duopoly dynamics.
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A cartel is a formal collusive arrangement among firms with the goal of increasing profits.
- Monopolistic Competition