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A full oligopoly is one in which a price leader is not present in the market, and where firms enjoy relatively similar market control. A partial oligopoly is one where a single firm dominates an industry through saturation of the market, producing a high percentage of total output and having large influence over market conditions.
An oligopoly where each firm acts independently tends toward equilibrium at the ideal, but such covert cooperation as price leadership tends toward higher profitability for all, though it is an unstable arrangement. There exist two types of price leadership. [14] In dominant firm price leadership, the price leader is
Suppose marginal costs were equal for the firms (so the leader has no market advantage other than first move) and in particular = =. The leader would produce 2000 and the follower would produce 1000. This would give the leader a profit (payoff) of two million and the follower a profit of one million.
Collusion often occurs within an oligopoly market structure, which is a type of market failure. Therefore, natural market forces alone may be insufficient to prevent or deter collusion, and government intervention is often necessary.
The emergence of oligopoly market forms is mainly attributed to the monopoly of market competition, i.e., the market monopoly acquired by enterprises through their competitive advantages, and the administrative monopoly due to government regulations, such as when the government grants monopoly power to an enterprise in the industry through laws ...
Price is a commonly known decreasing function of total output. All firms know , the total number of firms in the market, and take the output of the others as given. The market price is set at a level such that demand equals the total quantity produced by all firms.
Whereas the Bertrand model assumes that the firm with the lowest price acquires all the sales in the market. [2] When comparing the models, the oligopoly theory suggest that the Bertrand industries are more competitive than Cournot industries.
A kink in an otherwise linear demand curve. Note how marginal costs can fluctuate between MC1 and MC3 without the equilibrium quantity or price changing. The Kinked-Demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.