1. The Four Types of Market Structure
Number of Firms?
One firm
Few firms
Many firms
Type of Products?
Differentiated products
Identical products
Monopoly
Oligopoly
Monopolistic Competition
Perfect Competition
Tap water
Cable TV
Tennis balls
Crude oil
Novels
Movies
Wheat
Milk

2. Characteristics of an Oligopoly Market
Few sellers offering similar or identical products
Interdependent firms
Best off cooperating and acting like a monopolist by producing a small quantity of output and charging a price above marginal cost 10

3. Competition, Monopolies, and Illegal Cartels
The oligopolists may agree on a monopoly outcome.
Collusion
The firms may agree on the quantity to produce and the price to charge.
Cartel
The firms may join together and act in unison. 11

4. The Equilibrium for an Oligopoly
When oligopolists individually maximize profit, they produce more than a monopolist would but less than perfect competitors would.
The oligopoly price is less than the monopoly price but more than the competitive price. 13

5. Oligopoly: Tension between cooperation and competition
Oligopoly Price > Competitive Price = MC
So … Oligopoly Price > MC
Each firm would like to produce and sell MORE at the prevailing price (act competitively)
BUT
Each firm knows that if it tries to sell more, the other firms will retaliate … and it will be worse off
So it “cooperates”