At the end of this chapter, learners will be able to:
- Explain why oligopolies exist
- Contrast collusion and competition
- Interpret and analyze the prisoner’s dilemma problem
- Explain the role of game theory in understanding the behaviour of oligopolies
Many purchases that individuals make at the retail level are produced in markets that are neither perfectly competitive, monopolies, nor monopolistically competitive. Rather, they are oligopolies.
Examples of oligopoly abound and include the auto industry, cable television, and commercial air travel. If oligopolists collude with each other, they may effectively act like a monopoly and succeed in pushing up prices and earning consistently high levels of profit. We typically characterize oligopolies by mutual interdependence where various decisions such as output, price, and advertising depend on other firm(s)’ decisions.
“10.2 Oligopoly” in Principles of Economics 2e by OpenStax is licensed under Creative Commons Attribution 4.0 International License.