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Cards In This Set
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Oligopolymarket structure in which:
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Natural or legal barriers prevent the entry of new firmssmall number of firms competeeither natural or legal barriers to entry can create oligopoly
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Why does an oligopoly have a small number of firms?
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-the firms are interdependent and face a temptation to cooperate
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Interdependence
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With a small number of firms, each firm's profit depends on every firm's actions
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Cartel
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An illegal group of firms acting together to limit output, raise price, and increase profit
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Kinked Demand CurveFirms believe:
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-if it raises its price, competitors will not follow-if it lowers its price all its competitors will follow-below kink demand is inelastic
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Collusive Agreement
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An agreement between 2 or more producers to form a cartel to restrict output, raise the price, and increase profits
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Contestable Market
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A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants
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Limit Pricing
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Sets the price at the highest level that inflicts a loss on the entrant
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Anti Trust law
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The law that regulates oligopolies and prevents them from becoming monopolies or behaving like monopolies
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Resale price maintenance
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Occurs when a manufacturer agrees with a distributor on the price at which the product will be resold
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Tying Arrangement
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An agreement to sell one product only if the buyer agrees to buy another different product
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Predatory Pricing
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Setting a low price to drive competitors out of business with the intention of setting a monopoly price when the competition has gone
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