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NAME:
MRUNALI MHATRE
ROLL NO: MBAPH014007
Q.1 Explain Oligopoly Market Structure and explain
Kinked demand curve and Collusion
Market:
A market is a group of economic agents (individuals and/or
firms) that interact with each other in a buyer-seller
relationship.
Oligopoly Market Structure:
A market structure characterized by competition among a
small number of large firms that have market power, but that
must take their rivals actions into consideration when
developing their competitive strategies
Features of Oligopoly
Few Sellers
There are few sellers supplying either homogenous
products or differentiated products.
Homogenous or Differentiated
The oligopoly firm may be selling a homogenous product.
For
Example: Steel/Aluminium/Copper.
Blockaded entry and exit
Firms in the oligopoly market face strong restrictions on
entry and exit.
1
If a firm raises its price (D1), but the others do not match
the increase, then revenue will decline in spite of the price
increase.
If the firm lowers its price (D2), then the other firms will
match the decrease to avoid losing market share.
COLLUSIVE OLIGOPOLY
4
Cartel Arrangement:
A cartel is an agreement of cooperation formed between
competitors in a specific industry. A cartel will get together to set
prices and control levels of production with the aim of gaining
mutual benefit. Cartels are made up of companies in the same
industry that traditionally compete against each other, but who
have realized that it is mutually profitable for all players in the
marketplace to work in cooperation to control market conditions.
Members of a cartel will restrict levels of production and output
thereby creating high demand for the product and pushing prices
higher beyond the equilibrium prices.