Oligopoly: Description of and application of. Very precise

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Oligopoly Oligopoly comes from the Greek word meaning few sellers. Big business is an example of oligopoly. It is a market dominated by few sellers. These are industries like steel, automobiles, oil, and breakfast cereals. Because there are few firms, each firm must consider how their policies are going to effect their competitor's behavior. In some oligopolist industries there is a homogeneous product. Ex. Steel, Oil, etc. In others, the product is differentiated across producers. …

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…costs. Summary of Oligopoly Models Cartel = collusion, hard to establish and maintain Price leadership = firms act in unison on prices but do not form a formal cartel. Cost-Plus = simple pricing strategy, use costs and then add a percentage to cover overhead. Game Theory = price wars, interdependence, moves and countermoves Kinked Demand = firm pushes price down, all firms follow; firm raises price, other firms stay put and hope to catch consumers that come from other firm.