essay to understand

1. M.MANJUNATH
14051026

3.  IN the term ‘Oligopoly’ has been derived from
Greek words ‘ OLIGI’ means ‘few’ and
‘POLEIN’ means ‘seller’.
 A few dominant sellers sell ‘DIFFERENTIATED’
(OR) ‘HOMOGENOUS’ Products under
continuous Rivals action .
 Oligopoly looks Similar to other markets
forms as there can be many sellers ( like in
monopolistic competition) but a few very
lager sellers dominate the market.
What is Oligopoly ?

4.  Few Sellers:- Small no: of large firms compete..
 Entry Barriers :- No legal barriers ; only economic
in nature ..
 Huge Investment is requirements .
 Strong consumer loyalty for existing brands .
Features of ‘OLIGOPOLY’

5.  KINKED DEMAND CURVE .
 PRICING UNDER COLLUSION
 PRICING UNDER PRICE LEADERSHIP
3 Kinds of Pricing in ‘OLIGOPOLY MARKET’

6. KINKED DEMAND CURVE
PAUL SWEEZY
(1910-2004)

7.  If a firm decrease price , others will also do
the same so, The firm initially faces a highly
elastic demand curve.
 A price reduction will gave some gains to the
firm initially, but due to similar reaction by
rivals, this increase in demand will not give
sustained.
 If a firm increases it’s price, others will not
follow. Firm will lose large no:of its customers
to rivals due to substitution effect.

9. • Discontinuity in AR (D1KD2)
creates discontinuity in the
MR curve.
• At the kink (K), MR is constant
between point A and B.
• Producer will produce OQ,
whether it is operating on MC1
or MC2, since the profit
maximizing conditions are
being fulfilled at points S as
well as T.
• If MC fluctuates between A
and B, the firm will neither
change its output nor its
price.
• It will change its output and
price only if MC moves above
A or below B.
• D1K = highly elastic portion
of the demand curve when
rival firms do not react to
price rise
• KD2 = less elastic portion,
when rival firms react with a
price reduction.
D1
D2
K
A
B
MR
Quantity
O
MC1
MC2
P
Q
S
T
Price,
Revenue,
Cost

10.  Collusion is an agreement, usually secretive,
which occurs between two (or) more persons
to deceive , mislead , (or) defraud others of
their legal rights IT can involve “Wage fixing
between the colluding parties .

11.  Uniform Prices
 A penalty for Price discounts.
 Advance notice of price changes
 Information Exchange

14.  Leader fix the prices for entire industries.
 AS a result of price war – it emerged as winner
 Agreement among various firms with regard to
price – Formal or Informal .

15.  Price leadership of Dominant firm major
supply .
 Barometrice:- old experiment firm
 Aggressive :- Dominant firm to eliminate
rivals.