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

Rock paper scissors, Scenario To determine who is needed to try to to th...

Scenario To determine who is needed to try to to the nightly chores, 2 youngsters simultaneously build one among 3 symbols with their fists - a rock, paper, or scissors. straigh

Mixed strategy, A strategy consisting of potential moves and a chance distr...

A strategy consisting of potential moves and a chance distribution (collection of weights) that corresponds to how frequently every move is to be played. A player would solely use

Absolute auction, A general term for an English auction in which there is n...

A general term for an English auction in which there is no reserve price, guaranteeing that the object will be sold to the highest bidder regardless of the quantity of the bid.

Quiz to generate a grid, 1.a.out 2 1 Here is the grid that has been gene...

1.a.out 2 1 Here is the grid that has been generated: 1 1 1 0 0 0 0 0 1 1 0 1 0 0 1 1 1 1 0 0 1 1 1 1 0 1 1 0 0 1 1 0 0 1 0 1 1 1 1 1 1 0 1 0 1 1 0 1 0 1 1 1 0

nim game, Matches or different objects are organized in 2 or a lot of pile...

Matches or different objects are organized in 2 or a lot of piles. Players alternate removing some or all of the matches from anyone pile. The player to get rid of the last match w

Computer game zenda, Computer Game Zenda This game was invented by Jame...

Computer Game Zenda This game was invented by James Andreoni and Hal Varian; see their article, "Pre-Play Contracting in the Prisoners 'Dilemma".The paper also contains some co

Positive add, In a positive add game, the combined payoffs of all players a...

In a positive add game, the combined payoffs of all players aren't identical in each outcome of the sport. This differs from constant add (or zero add) games during which all outco

Determine the pure strategy nash equilibria, a) Define the term Nash equili...

a) Define the term Nash equilibrium b) You are given the following pay-off matrix:   Strategies for player 1   Strategies for player 2

Beard strategy, #questi1 A, Explain how a person can be free to choose but...

#questi1 A, Explain how a person can be free to choose but his or her choices are casually determined by past event 2 B , Draw the casual tree for newcomb''s problem when Eve ca

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