Oligopoly and Monopolistic Competition

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What is an oligopoly?

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A market structure where a few firms dominate the market.

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How does monopolistic competition compare with perfect competition and monopoly?

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Firms in monopolistic competition have more market power than firms in perfect competition but less than monopolies.

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What are the assumptions of the monopolistic competition model?

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Few firms dominate the market, products may be homogeneous or differentiated, and barriers to entry exist.

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What does interdependence mean in the context of oligopoly?

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Each firm’s decision affects others in the market.

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How does game theory apply to oligopolies?

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Game theory helps predict competitive strategies in oligopolies, such as pricing and output levels.

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What is a collusive oligopoly?

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A market where firms may form cartels to set prices or limit production, such as OPEC.

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What is a non-collusive oligopoly?

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A market where firms compete without explicit agreements but may still follow the lead of market leaders.

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What are the potential outcomes of oligopolies compared to competitive markets?

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Oligopolies can result in higher prices and lower output than competitive markets, but they may also benefit from economies of scale.