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Lecture 14

ECON 402 Lecture Notes - Lecture 14: Oligopoly

Course Code
ECON 402
William Crowley

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1.1An oligopoly is a market structure where a small number of interdependent firms compete.
Three examples of oligopolies in the United States are industries that produce or sell automobiles, athletic
foot ware, and cigarettes.
1.2Schultz commented on this passage that, "The claim is by definition nonsense," because monopoly
is by definition a market with one firm
1.3 Without barriers to entry new firms will enter industries, where firms are earning economic
The most important barriers to enter are economies of scale, ownership of key input, and
government - imposed barriers.
1.4An example of a government-imposed barriers to entry are a quota on imputes and
occupational licening
The government would be willing to impose barriers to encourage firm to carry out research
and development of new and better products, protect the public from incompetent
practitoners, and to protect US firm from international competition.
2.3 Unlike explicit collusion, implicit collusion is where firms signal to each other without
actually meting and agreeing not to compete.
An example of an explicit collusion is where firms meet and agree to not compete, and an
example of implicit collusion is price leaderships
4.1 The five competitive forces are existing firms,threat from new entrants ,competition from
substitues , bargaining power of buyers, and bargaining power of suppliers.
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