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Oligopoly
A market structure dominated by a few large firms, characterized by high concentration ratios and strategic interdependence.
Collusion
A secret agreement among firms to cooperate in a way that restricts competition, typically to maintain high prices or market control.
Non-collusive oligopoly
A market situation where firms do not cooperate or collude, leading to competitive behaviors and price rigidity.
Concentration ratio
A measurement used to determine the extent of market control held by a certain number of firms, often expressed as CRn.
Kinked demand curve
A model that illustrates why prices in an oligopoly tend to be stable due to expected reactions from competitors to price changes.
Interdependence
A characteristic of oligopolistic firms, indicating that the actions of one firm significantly affect the decisions and outcomes of others.
Barriers to entry
Obstacles that make it difficult for new firms to enter a market, often including high capital costs and brand loyalty.
Non-price competition
Strategies used by firms in oligopolies to compete through factors other than price, such as advertising and product differentiation.
Price leadership
A situation in oligopolies where one leading firm sets the price for the industry, and others follow its lead.
Game theory
A mathematical concept used to analyze strategies in situations where the outcome depends on the actions of multiple agents, such as firms in an oligopoly.
Cartel
A formal agreement among firms in an oligopoly to coordinate prices and output, often at the expense of competition.
Price stickiness
The resistance of the price level to change, even in the face of changing demand or supply conditions in an oligopoly.
Homogeneous products
Products that are identical or highly similar, leading to direct competition among firms in an oligopoly.
Product differentiation
The process of distinguishing a product from others to make it more attractive to a specific target market.
Supernormal profits
Profits that exceed the normal expected return on investment, often achieved in non-competitive market structures.
Strategic decision-making
The process by which oligopolists make decisions that consider the likely response of competing firms.
Dynamic efficiency
Improvements in production processes and products over time, often resulting from investment in innovation in oligopolistic markets.
Allocative efficiency
A state of allocation of resources whereby consumer satisfaction is maximized; often not achieved in oligopolistic markets.
Price wars
A competitive exchange among rival companies who lower prices to gain share, leading to reduced profits for all.
Tacit agreement
An implicit understanding among firms in an oligopoly to maintain certain pricing or market behavior without formal communication.
Regulatory issues
Legal challenges and compliance burdens faced by firms operating in collusive or anti-competitive settings.
Consumer welfare
The overall well-being and satisfaction of consumers, often negatively affected by collusion and monopoly pricing.
Deadweight loss
A loss of economic efficiency that occurs when equilibrium for a good or service is not achieved
Oligopolistic competition
A form of competition in an oligopoly, where firms compete on factors other than price.
Cost-plus pricing
A pricing strategy where firms set prices based on production costs plus a fixed profit margin.
Market segmentation
Targeting specific groups of consumers by tailoring goods or services to meet their needs better than competitors.
Market power
The ability of a firm to influence the price of a product or service in the market due to its size or market share.
