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MicroEconomics - Lecture 9

MicroEconomics - Lecture 9 - Oligopoly 1 Imperfect...

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Oligopoly 1. Imperfect Competition: Between Monopoly and Perfect Competition Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. Type of Imperfectly Competitive Markets: Oligopoly- Only a few sellers, each offering a similar or identical product to the others. Monopolistic Competition- Many firms selling products that are similar but not identical. (i.e. differentiated products). 2. Oligopoly: Markets With Only a Few Sellers Characteristics of an Oligopoly Market: Few sellers offering similar or identical products. Interdependent firms. Best off cooperating and acting like a monopolist by producing a small quantity of output and charging a price above marginal cost. Because of few sellers, the key feature of oligopoly is the tension between cooperation and self-interest. A Nash Equilibrium is a situation in which economic actors interacting with one another each choose their best strategy, given the strategies that all the others have chosen. In Nash Equilibrium, no one (no firm) has an incentive to deviate from his/her 9its) current actions.
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