What Is an Oligopoly?
An oligopoly is a market with only a few big sellers, each watching and reacting to the others.
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1.What is an oligopoly?
An oligopoly is a market with only a few big sellers, each watching and reacting to the others.
2.In the example, both stations keep prices high. What does each earn per day?
If both keep their price high, each earns 1,000 a day (made-up numbers).
3.What happens when both stations cut their price?
Both cut and both end at 600: worse off than when both stayed high, which is the prisoner's dilemma.
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Sources (3)
- U.S. Department of Justice, Antitrust Division: Herfindahl-Hirschman Index
- UK Government: State of competition, Annex 2 - Existing competition indicators (February 2020)
- Eigene Berechnung (synthetisches Rechenbeispiel
Education only. Not financial advice.