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

Assignment Help:

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.


Related Discussions:- Explain oligopoly''s structure and use game theory

Strictly dominant strategy , A strategy is strictly dominant if, no matter ...

A strategy is strictly dominant if, no matter what the other players do, the strategy earns a player a strictly higher payoff than the other. Hence, a method is strictly dominant i

Evolutionary games, How much time you want to spend on this material willde...

How much time you want to spend on this material willdepend on the focus of your course. For many social sciencecourses, a general exposure to the ideas, based on a quick runthroug

Multiple nash equilibria, The following is a payoff matrix for a non-cooper...

The following is a payoff matrix for a non-cooperative simultaneous move game between 2 players. The payoffs are in the order (Player 1; Player 2): What is/are the Nash Equil

Tower defense, Tower defense - is a subgenre of real-time strategy games. T...

Tower defense - is a subgenre of real-time strategy games. The goal of tower defense games is to try to stop enemies from crossing a map by building towers which shoot at them as t

Battle of the sexes, scenario A wife and husband ready to meet this even...

scenario A wife and husband ready to meet this evening, but cannot remember if they will be attending the opera or a boxing match. Husband prefers the boxing match and wife pref

Iterated dominant strategy equilibrium, What is the Iterated Dominant Strat...

What is the Iterated Dominant Strategy Equilibrium (IDSE) and associated pay-offs? Type your answer in the following form: (c,B) , (6, 4) if you think the outcome is

Calculate expected payoff, 1. The town of Sunnydale, CA is inhabited by two...

1. The town of Sunnydale, CA is inhabited by two vampires, Spike and Anya. Each night Spike and Anya independently hunt for food, which each one finds with probability 1/2 . Becaus

Nash equilibrium - pay off, The following is a payoff matrix for a non-coop...

The following is a payoff matrix for a non-cooperative simultaneous move game between 2 players. The payoffs are in the order (Player 1; Player 2): What is the Nash Equilibri

Combining simultaneous and sequential moves, Combining Simultaneous and...

Combining Simultaneous and  Sequential Moves The material in this chapter covers a variety of issues that require some knowledge of the analysis of both sequential- move

Ring, A collection of colluding bidders. Ring members comply with rig bids ...

A collection of colluding bidders. Ring members comply with rig bids by agreeing to not bid against one another, either by avoiding the auction or by putting phony (phantom) bids

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd