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Oligopoly Pricing Are bigger companies more efficient?

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Presentation on theme: "Oligopoly Pricing Are bigger companies more efficient?"— Presentation transcript:

1 Oligopoly Pricing Are bigger companies more efficient?

2 Perfect Competition Monopolistic Competition Oligopoly Monopoly Most competitive Lowest Price Highest Quantity Least competitive Highest Price Lowest Quantity 4 Market Structures 2-8 Firms dominate industry

3 Oligopoly: Examples Airlines & Commercial Aircraft Manufacturers Automobile CompaniesHardware Stores

4 Oligopoly Few interdependent sellers Identical or slightly differentiated products difficult to enter or leave market incomplete information varying degree of price control Market Characteristics

5 Oligopoly Company 1 Company 2 Actions of your competition affect you! INTERDEPENDENCE

6 Non-cooperative BehaviorCooperative Behavior Should I cooperate? SELF INTEREST? Oligopolies are Interdependent

7 End Result of Oligopolies Prices higher than perfect competition but less than monopoly Economic profit > 0 in both short run & long run Risk of collusion if firms cooperate to raise prices

8 Article: Rise of Oligopolies 3 Reasons why Benefits Costs Risk?

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