Oligopoly

Topics: Monopoly, Economics, Competition Pages: 2 (654 words) Published: June 5, 2014
A. Explain the different objectives that a firm in an oligopolistic market structure might try to achieve An oligopolistic market is a market or an industry that is dominated by a few firms. Some of the oligopolistic market may produce almost identical products; other will do totally different products, and finally other oligopolistic industries will do marginally different products. A few firms dominate the industry, it may have a large numbers of firms in the industry but a large proportion of output that is acquired is by a small number of firms. They are interdependent, this is because the industry is made up of small firms and a change in one of those firms may cause a great impact on the other, this causes a price rigidity because the price in the industry tend to change much less than in more competitive markets. In most examples of an oligopoly, there are high barriers to entry,

The main goal of an oligopoly is to maximize its profits and there are different objectives that can be used to achieve this goal, for example: The increase or decrease in prices. The strategy of a firm is interdependent. This means that every strategy that they do, they must take into consideration the possible reactions of the rival firms. For examples if a firm decides to raise its price Ii will increase its profits only of the other firm choses to do likewise. However the competitor may increase its profits by maintaining its price and attracting the customers away from the other firm therefore decreasing its profits. On the other hand a firm can also increase intra price if they decrease their price only the rival firm choses to maintain its price. However the competitor would experience a large fall in its profits than if it also decrease its price. Although if the competitor decides to decrease its price, both firms would have decreased their profits, so the best for the firm is to maintain it price. Improving actual or brand images. Its is away of non-price...
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