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Oligopoly Industry November 5, 2008

Posted by petrarcanomics in Imperfect Competitors.
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Oligopolies industries are made up of a few firms. Each firm’s decisions have an enormous impact on the market share of the otehr firms in the industry. For example, if one oligopolist drops price, the other oligopolist must drop their price or face losing market share. Consequently, oligopolists avoid price competition and instead prefer to differentiate product in order to gain market share.

The best models to learn the behavior of oligopoly indusries are game theory type models, such as the prisoner’s dilemma or the Nash equilibirum.

For more information, check out the Reffanomics lessons for oligopolies.

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