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Oligopoly: Description of and application of. Very precise
Title: Oligopoly: Description of and application of. Very precise
Category: Business & Economy / Global Economy
Details: Words: 1196 | Pages: 5.1 (approximately 235 words/page)
Oligopoly: Description of and application of. Very precise
Oligopoly
Oligopoly comes from the Greek word meaning few sellers.
Big business is an example of oligopoly. It is a market dominated by few sellers. These are
industries like steel, automobiles, oil, and breakfast cereals.
Because there are few firms, each firm must consider how their policies are going to effect
their competitor's behavior.
In some oligopolist industries there is a homogeneous product. Ex. Steel, Oil, etc.
In others, the product is differentiated across producers. Ex. Automobiles, tobacco.
Where the products are homogeneous, there is …showed first 85 words of 1196 total…
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…showed last 85 words of 1196 total…tend to remain unchanged even in the face of changing
costs.
Summary of Oligopoly Models
Cartel = collusion, hard to establish and maintain
Price leadership = firms act in unison on prices but do not form a formal cartel.
Cost-Plus = simple pricing strategy, use costs and then add a percentage to cover
overhead.
Game Theory = price wars, interdependence, moves and countermoves
Kinked Demand = firm pushes price down, all firms follow; firm raises price, other firms
stay put and hope to catch consumers that come from other firm.
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