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An oligopoly (from Ancient Greek ὀλίγος (olígos) 'few' and πωλέω (pōléō) 'to sell') is a market in which pricing control lies in the hands of a few sellers. [ 1 ] [ 2 ] As a result of their significant market power, firms in oligopolistic markets can influence prices through manipulating the supply function .
When comparing the models, the oligopoly theory suggest that the Bertrand industries are more competitive than Cournot industries. This is because quantities in the Cournot model are considered as strategic substitutes ; that is, the increase in quantity level produced by a firm is accommodated by the rival, producing less.
Oligopoly: The number of enterprises is small, entry and exit from the market are restricted, product attributes are different, and the demand curve is downward sloping and relatively inelastic. Oligopolies are usually found in industries in which initial capital requirements are high and existing companies have strong foothold in market share.
In microeconomics, the Bertrand–Edgeworth model of price-setting oligopoly looks at what happens when there is a homogeneous product (i.e. consumers want to buy from the cheapest seller) where there is a limit to the output of firms which are willing and able to sell at a particular price. This differs from the Bertrand competition model ...
1. The production capacity of the two manufacturers is limited. Under a certain price level, the output of a particular Oligopoly cannot meet the market demand at this price level so that another manufacturer can obtain the residual market demand. 2. In a certain period, two prices can exist in the market at the same time. 3.
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 the biggest firm.
"The Kinky Oligopoly Demand and Rigid Prices" The Journal of Political Economy Vol. 55, pp. 432-449. Stigler, G. 1978. "The literature of economics: the case of the kinked oligopoly demand curve" Economic Inquiry Vol. 16, pp. 185–204. Sweezy, P. 1939. "Demand Under Conditions of Oligopoly" The Journal of Political Economy Vol. 47, pp. 568-573.
An oligopoly may engage in collusion, either tacit or overt to exercise market power and manipulate prices to control demand and revenue for a collection of firms. A group of firms that explicitly agree to affect market price or output is called a cartel , with the organization of petroleum-exporting countries ( OPEC ) being one of the most ...