Download No Slide Title

Oligopoly:
This is a form of market organization in which
there are few sellers of a homogeneous or
differentiated product. Unlike the other forms of
market structure that we have discussed, a firm in
Oligopoly makes pricing and marketing decision
in light of the expected response by rivals.
Characteristics of Oligopoly:
 Few Sellers: A handful of firms produce
the bulk of industry output.
 Homogeneous or unique product: If
product is homogeneous, then we have
“Pure Monopoly”. If product is
differentiated, then we have “Differentiated
Oligopoly”.
 Blockaded Entry and Exit: Firms are heavily
restricted from entering or leaving the
industry.
 Imperfect Dissemination of Information:
Different Measures of Market Concentration:
Concentration Ratios:
This is the percentage of total industry sales of
the 4, 8 or 12 largest firms in the industry.
Herfindahl Index:
This is the sum of the squared values of the
market shares of all the firms in the industry.
The Kinked Demand Curve Model:
Price
P
0
Q
Quantity
Price
P
0
Q
Quantity
Price
P
0
Q
Quantity
Centralized Cartels:
P
P
 MC
MC2
MC1
P
D
MR
0
q1
0
q2
0
Q
Price Leadership:
Price,
MC
MCF
MC
P
D
MR
0
QL
QF
DL
Quantity