Briefly outline some of the main models of oligopoly in which firms compete according to output. Hence, discuss the contention that non-collusion is the inevitable outcome of oligopoly.
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In an oligopoly, there are a number of firms which are all large enough to have an effect on price. Participants therefore analyse their competitors expected reaction to a change in output or price in order to make a profit maximizing decision. This is unlike for example, a competitive market, where results depend only on a firms own actions. Hence, a firm must know how their competitors will react to changes in price or quantity if they wish to find the optimum levels of output and price.
In this essay, I will assume that there are only two firms in the market, this situation is known as…
- Briefly outline some of the main models of oligopoly in which firms compete according to output. Hence, discuss the contention that non-collusion is the inevitable outcome of oligopoly.
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