Lecture 8 - Oligopoly

Imperfect Competition

Market structures that fall between perfect competition and monopoly, where markets do not meet all perfect competition assumptions.

Oligopoly

A market structure characterized by a small number of firms that have significant market power and may engage in strategic behavior.

Nash Equilibrium

A situation in which each firm in an oligopoly makes the best decision based on the decisions of other firms, resulting in no incentive to change.

Collusion

An agreement among firms in an oligopoly to coordinate production and pricing to maximize joint profits, acting like a monopoly.

Cartel

An organization formed by firms in collusion which coordinates production and pricing decisions among its members.

Bertrand Competition

An oligopoly model where firms compete by setting prices, leading to outcomes similar to perfect competition.

Cournot Competition

An oligopoly model where firms compete by choosing quantities to produce, not prices. Each firm's output decision affects the market price.

Stackelberg Competition

An oligopoly model where firms make production decisions sequentially, with the first mover potentially gaining a competitive advantage.

Monopolistic Competition

A market structure characterized by many firms selling differentiated products, where there are no barriers to entry.

Differentiated Products

Products that are not perfect substitutes for each other, allowing firms to have some market power over pricing.