Oligopoly

1
Oligopoly

• What oligopoly is a market in which there are so
  few sellers that they consider each others
  competitive reactions.
• Examples of oligopoly markets
• Cooperation vs. noncooperation
• A. The basic Prisoners Dilemma
• B. To cut prices or not?
• C. Repeated games

2
Oligopoly

• Cartels an extreme case
• A. What a cartel is
• B. What a cartel requires
• 1. Agreement about price AND
• 2. Agreement about output AND
• 3. Market sharing rules AND
• 4. Enforcement

3
Oligopoly

• C. Cartels the big problem
• 1. Achieving agreement
• 2. Detecting and deterring cheating
• D. Facilitating and hindering collusion
• E. Formal cartels are regarded as
• illegal restraints of trade in the U. S.

4
Oligopoly

• Some less extreme forms of collusion
• A. Market-sharing agreements
• B. Tacit collusion
• 1. Stable market shares
• 2. Systematic price matching
• 3. Common practices
• 4. Live and let live

5
Oligopoly

• C. Price leadership
• 1. Information role
• 2. Enforcement role
• 3. Real leadership?
• D. Government-run cartels
• E. Legality and illegality again