Explain oligopoly''s structure and use game theory, Game Theory

Explain oligopoly's structure and use game theory to explain why oligopoly firms tend not to use price to compete.

Answer-

Oligopoly is an imperfect market where there are a few sellers in the market, producing either identical products or producing products which are close but not perfect substitutes of each other. Main features of this market are as follows-

1)  Few sellers in the market.

2)  Lack of uniformity.

3)  Homogenous or differentiated product.

4)  Advertisement and selling costs.

5)  Interdependence of firms on each other.

6)  Barriers on entry and exit.

Firms do not use prices to compete with each other because if a firm will reduce its product's price the other firm will respond by lowering its price too. The first will then react by further lowering its product's price. This way the firms will act and react on each other's decision relating to price change. This cut throat competition will reduce each firm's profits. On the other hand if the firm raises the price of product it is not certain if the other will also raise its price. In this case the firm will lose because its customers will shift to other firms product Therefore firms prefer not to compete on the basis of price rather they would prefer non-price competition as the monopolist firms do.

Posted Date: 3/12/2013 4:01:32 AM | Location : United States







Related Discussions:- Explain oligopoly''s structure and use game theory, Assignment Help, Ask Question on Explain oligopoly''s structure and use game theory, Get Answer, Expert's Help, Explain oligopoly''s structure and use game theory Discussions

Write discussion on Explain oligopoly''s structure and use game theory
Your posts are moderated
Related Questions
A common term for an English auction, a sort of sequential auction during which an auctioneer directs participants to beat the present, standing bid. New bids should increase the p

GAME 5 All-Pay Acution of $10 Everyone plays. Show the students a $10 bill, and announce that it is the prize; the known value of the prize guarantees that there is no winer’s

Leadership in an Oil Production Game Students can be broken into pairs to play this game once, witheach student's representing one country; then each shouldswitch partners and

The">http://www.expertsmind.com/questions/green-beard-strategy-30135520.aspx The same questions on this link.

Scenario The French thinker, Jean Jacques Rousseau, presented the subsequent state of affairs. 2 hunters will either jointly hunt a stag (an adult deer and rather massive meal)

i have to make a tic tac toe game in matlab i dun have any idea what to do?

Ship, Captain and Crew (sometimes called Ship, Captain and Mate) was a popular bar game played for drinks with five dice and throwing cup. Each player gets three throws. He has to

Games with Strat e gic M ov es   The ideas in this chapters can be brought to life and the students can better appreciate the subtleties of various strategic moves an

A trigger strategy sometimes applied to repeated prisoner's dilemmas during which a player begins by cooperating within the initial amount, and continues to cooperate till one defe

(a) Equilibrium payoffs are (1, 0). Player A’s equilibrium strategy is S; B’s equilibrium strategy is “t if N.”   For (a): Player A has two strategies: (1) N or (2) S. P