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Lecture notes 4.1.3 Oligopoly
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These notes helped me get an A* in A Level Economics, covering all aspects of the specification, plus hints of real world context.
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4.1.3 Oligopoly A market characterized by a small number of firms who realize they are interdependent in their
pricing and output policies
Firms can operate in an oligopolistic market
Market that has oligopolistic behaviour
o Independent firms with stable prices collude
Concentration Ratios
o Combined MarketShare of top few firms in market
o The higher the concentration ratio the less competitive the market
Competition In oligopoly
o Collusive behaviour
Firms agree to work together on something
Set a price or fix the quantity of output they produce
Collusion leads to lower consumer surplus higher prices and greater profits
Allows oligopolist to act as monopolist
Strong incentives to collude
Maximise their business potential
Deter new entrants
o Non-collusive behaviour
Firms compete to establish a competitive oligopoly
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