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Oligopoly
chapter 16
| Term | Definition |
|---|---|
| Brand proliferation | This is where existing firms produce and advertise several brands thus limiting the market available to a potential new entrant |
| Collusion | any action undertaken by separate and rival companies to restrict competition between them with a view to increasing their total profits |
| Concentration ratio | An industry is said to have high concentration ratio if a small number of firms account for a very large part of the total output |
| Explicit conclusion | this occurs when separate companies jointly decide on a specific course of action in an arrangement known as a cartel |
| implicit collusion | This occurs when there is no formal agreement between firms, but each firm recognises that joint profits will be higher if firms collectively behave as if they were branches of a single monopolist firm. |
| joint profit maximisation | this is where firms co-operate to maximise their total profits |
| limit pricing | this is where a firm sets its firm sets its price so low that potential new firms are discouraged from entering the industry |
| non-price competition | any action undertaken by a firm to increase its sales at the expense of rival firms, other than the lowering of prices |
| price leadership | this is where one firm is dominant either because of its large size or its early entry to the market. it stes its prices independently of oter firms who then react to its decisson |
| price rigidity | a reluctance on the part of the firm of oligopoly to change from the current price because any such change will cause a fall in total revenue |
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jmartineconomics
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