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Oligopolies are interdependence of one another.
With one does reflect what the other firm will do. If one raise the price other will keep their prices steady. If you lower the price other firms will lower their prices to keep up with the competition.
When others firms are trying to undercut the competition of other.
Only in the short run. In the long run competition will drive out some firms only leaving the big firms (Economies of Scale)
Big in the 80's between Airlines
A few big firms that dominate the industry. (Cars firms in America)
Firm are heterogeneous (differentiated) and homogeneous (cars and steal)
reduce the price below the average total cost. and waiting for the other to go out of business and after the competition has ceased then the firm raise the price to make up for the lost profit.
Power over price is the main thing all firms desire to have.
The steeper the demand curve the more power you have.
- Imperfect competition (no power
- Monopolistic competition (some power)
- Monopoly (most power)
What would you like to do?
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