Understanding Imperfect Competition and Oligopoly

Barriers to Entry

• Preventing new competitors from easily entering an industry.

• Strategies used by companies to reduce production costs.

• Regulations that promote competition in the market.

• Techniques for improving customer service and satisfaction.

Elasticity in Kinked Demand Curve

• elastic below the kink, less elastic above

• elastic above the kink, less elastic below

• perfectly elastic at all points

• inelastic at all points

Non-Price Competition

• through advertising, product differentiation.

• by lowering prices to attract customers.

• by increasing production efficiency.

• through exclusive distribution channels.

Nash Equilibrium

• A situation where players can benefit by changing their strategies

• A scenario where no player can benefit by changing strategy unilaterally.

• A condition where all players cooperate for mutual benefit

• A state of constant competition among players

Cartel

• A group of firms collaborating to set prices and limit production.

• An organization that promotes free trade among nations.

• A legal agreement between companies to share resources.

• A type of market structure with many competitors.

Collusion

• an agreement among firms to set prices or output.

• a strategy to increase competition among firms.

• a method to reduce production costs.

• a practice to enhance product quality.

Example of Collusion

• controlling oil prices.

• increasing competition among businesses.

• reducing prices to attract customers.

• offering better services than competitors.

Characteristics of Oligopoly

• firms, interdependent pricing, barriers to entry.

• many small firms with no market power.

• a single firm dominating the market.

• perfect competition with no barriers to entry.

Price Leadership

• A firm sets the price, and others follow.

• All firms set prices independently.

• Prices are determined by government regulation.

• Prices are set based on consumer demand.

Example of Oligopoly

• automobile industry

• farming industry

• software industry

• textile industry