Thursday
July 31, 2014

Homework Help: Microeconomics

Posted by Susan on Sunday, May 31, 2009 at 8:30pm.

What keeps oligopolies from becoming a monopoly? Why don't the firms join to dominate the market?

I know what oligopolies means:

There are three conditions in a oligolopolistic market place.
There has only a few large dominant firms.
Market has high barriers to entry.
Firms may produce products that are either defferantiated or homogeneous and firms tend to collude.
There are a number of explanations, and it depends on whether the goods are homogeneous or not. First, is that the firms overtly or covertly collude the set prices. Then, there is the dominant firm model, which says the dominant firm sets the proces and the other firms fal in line. There is the cournot model which suggest each firm tries to estimate what the other firms will do, and then based on this finding the firm produces to maximize its own profits.


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