oligopoly conclusions - collude or compete?

what factors promote competitive oligopolies

large number of firms (a less concentrated oligopoly)

new market entry possible

one firm with significant cost advantages

homogenous goods

saturated market

why does a large number of firms promote competitive oligopolies

it is much more difficult to organise collusion when there are many firms

why does new market entry possible promote competitive oligopolies

making supernormal profit by colluding together is not attractive as it incentivises new firms to enter the market

why does one firms promote with significant cost advantages competitive oligopolies

it makes it difficult to organise and fix a price or quantity to produce at in collusion

why does homogenous goods promote competitive oligopolies

firms dont have price making power

why does saturated markets promote competitive oligopolies

the only way to get ahead of other firms is to take away market share from other firms

why factors promote collusive oligopolies

small number of firms

similar costs

high entry barriers

ineffective competition policy

consumer loyalty

consumer inertia

why does a small number of firms promote collusive oligopolies

it is much easier to organise collusion

why does similar costs promote collusive oligopolies

much easier to organise and fix prices and quantity as they are more likely to agree

why does high barriers to entry promote collusive oligopolies

firms will be able to make supernormal profit without new firms entering the market, therefore benefits of collusion can last in the long term

why does ineffective competition policy promote collusive oligopolies

more likely to get away with collusion

why does consumer loyalty promote collusive oligopolies

if you try to undercut a firm that has a lot of brand loyalty it will not make any difference as consumers will still buy from them

positives of competitive oligopolies

allocative efficiency

productive efficiency

x efficiency

negatives of competitive oligopolies

dynamic inefficiency

lose economies of scale benefits

positives of collusive oligopolies

dynamic efficiency

economies of scale benefits

negatives of collusive oligopolies

allocative inefficiency

productive inefficiency

x inefficiency

diseconomies of scale

you evaluate a competitive oligopoly as if it is a…

competitive market

you evaluate a collusive oligopoly as if it is a…

monopoly