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Angeles University Foundation College of Business and Accountancy
Angeles University Foundation College of Business and Accountancy
Angeles University Foundation College of Business and Accountancy
Market Structure:
Oligopoly
Characteristic of oligopoly
Few firms
Either homogenous or differentiated products.
Difficult entry
Distinguishing feature: interdependence
There are different possible ways that firms in oligopoly will compete and behave this will
depend upon:
Collusion
Whenever a market is dominated by only a few firms, firms can benefit at the expense of
consumers by “agreeing” to restrict output or, equivalently, to charge higher prices.
Implicit collusion
Also termed as tacit collusion
This occurs when two or more firms in the same industry informally agree to control the
market.
Prime example: price leadership
Price leadership: one firm takes the lead of setting a price that will boost profits for the
entire industry. Other firms then go along with this price, knowing that they stand to benefit by
doing so.
Explicit collusion
Also termed as overt collusion
This occurs when two or more firms in the same industry formally agree to control the
market.
Examples of oligopoly