Back to Economics Notes
oligopoly game theory
A LevelEconomics~5 min read
Overview
This lesson delves into the characteristics and behaviour of firms operating in an oligopolistic market structure. We will explore how interdependence between firms leads to strategic decision-making, often analysed using the principles of game theory.
Introduction to Oligopoly
An **oligopoly** is a market structure where a small number of large firms dominate the market, offering either homogeneous or differentiated products. Key characteristics include: * **Few large firms:** A handful of companies account for a significant portion of market output. * **High barrier...
Unlock 5 More Sections
Sign up free to access the complete notes, key concepts, and exam tips for this topic.
No credit card required · Free forever
Key Concepts
- Oligopoly: A market structure characterised by a small number of large firms dominating the market.
- Interdependence: The mutual reliance and strategic interaction between firms in an oligopoly, where the actions of one firm significantly impact others.
- Collusion: An agreement, often secret, between competing firms to fix prices, restrict output, or divide markets, aiming to reduce competition and increase profits.
- Game Theory: A mathematical framework used to model strategic interactions between rational decision-makers, particularly useful for analysing oligopolistic behaviour.
- +3 more (sign up to view)
Exam Tips
- →When explaining oligopoly, always emphasise **interdependence** as the defining characteristic and link it to strategic decision-making.
- →For game theory questions, clearly draw and label the **payoff matrix** and identify the **Nash Equilibrium**. Explain *why* it is a Nash Equilibrium.
- +3 more tips (sign up)
More Economics Notes