The Theory of Games: Game Theory - Term Paper Example

Download file to see previous pages... This form of market structure has a few firms that are present, and the freedom to entry here is restricted. These firms mostly deal in undifferentiated or differentiated products and some of the best examples include cars, cement, and electronic appliances. The demand curve for this kind of market is mostly downward sloping and the slope is relatively inelastic in nature (Riley). This however depends on the price changes of the rivals and the reaction of the company to these changes.
As seen in the definition that has been discussed earlier, the oligopoly markets are those where there are only a few firms that exist in the market. Based on the definition and the nature of these markets, the main features of an Oligopolistic market are as discussed below:
a) Interdependency among Firms: As discussed earlier, there are a few firm that are present in the oligopoly markets. This leads each of the firms to be interdependent on each other. Interdependent here means, each firm is affected by the moves and actions of the other firms in the markets and every single step including changes in prices, advertising, or specification of products leads has an affect on the other companies in the industry (Sloman and Sutcliffe).
b) Barriers to Entry: The oligopoly markets have similar barriers to entry like the monopoly markets. These include, a) Economies of scale, b) Economies of Scope, c) Brand loyalty and product differentiations, d) lower costs for established firms, e) Control over or ownership of, retail outlets or wholesale outlets, f) Control over or ownership of, the key factors affecting production, g) Protection – legally, h)Intimidations, i) Tactics, and j) mergers and takeovers (Sloman and Sutcliffe).
Collusion and Competition: There are two main ideas that relate to the markets of Oligopoly. ...Download file to see next pagesRead More