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An analysis of the strategic behavior of an Oligopoly
Dátum pridania: 29.01.2002 Oznámkuj: 12345
Autor referátu: matotam
Jazyk: Angličtina Počet slov: 1 554
Referát vhodný pre: Stredná odborná škola Počet A4: 5.1
Priemerná známka: 2.98 Rýchle čítanie: 8m 30s
Pomalé čítanie: 12m 45s

Firms in this market structure use the same decision rule to maximize profit as in all other market structures.
To maximize profit, select the level of out put where Marginal Revenue = Marginal Cost.

You can realize from the graph above that the profit maximizing level of output and price (at the kink in the demand curve) is not going to change even though the costs to the firm change. When marginal cost increase from MC1 to MC2, the profit maximizing level of output does not change. MC1 and MC2 are equal to MR at the same level of output. The result is that prices in an oligopolistic market are less flexible than in other market structures. Costs can change, but prices might not. Firms may wait for the price leader to change the price. Firms in an oligopolistic market structure might have and usually have the goal of maintaining market share, rather than maximizing profit.
The last fourth oligopoly model is called price leadership. Price leadership is something that economists refer as a game of follow-the-leader, it is a pricing strategy that one leading or dominant company perhaps the one that owns the biggest market share sets the price for the whole industry and others will follow. Companies are sometimes matching the prices with the biggest company. This oligopoly model is very common. Oligopoly is a market structure even though is much more difficult to evaluate when compared to other market structures, is very common in today’s society and as we move on in new century and companies are getting bigger and more powerful every day, with the vision of global market it is certain that this market structure is going to be in the future world market a dominant market structure.


Tucker, I. B. (2000), Market structures; Monopolistic competition and oligopoly, Economic for Today. South-Western College Publishing.

Microeconomics on-line [2001, April 23]

[2000,April 27].
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