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One form of collusive oligopoly is a cartel, [18] [better source needed] a monopolistic organisation and relationship formed by manufacturers who produce or sell a certain kind of goods in order to monopolise the market and obtain high profits by reaching an agreement on commodity price, output and market share allocation. However, the ...
Collusion often takes place within an oligopoly market structure, where there are few firms and agreements that have significant impacts on the entire market or industry. To differentiate from a cartel, collusive agreements between parties may not be explicit; however, the implications of cartels and collusion are the same. [4]
An oligopoly where each firm acts independently tends toward equilibrium at the ideal, but such covert cooperation as price leadership tends toward higher profitability for all, though it is an unstable arrangement. There exist two types of price leadership. [14] In dominant firm price leadership, the price leader is the biggest firm.
Headquarters of the Rhenish-Westphalian Coal Syndicate, Germany (at times the best known cartel in the world), around 1910. A cartel is a group of independent market participants who collude with each other as well as agreeing not to compete with each other [1] in order to improve their profits and dominate the market.
In oligopoly theory, conjectural variation is the belief that one firm has an idea about the way its competitors may react if it varies its output or price. The firm forms a conjecture about the variation in the other firm's output that will accompany any change in its own output.
There are four basic types of market structures in traditional economic analysis: perfect competition, monopolistic competition, oligopoly and monopoly. A monopoly is a structure in which a single supplier produces and sells a given product or service.
Anti-competitive practices are commonly only deemed illegal when the practice results in a substantial dampening in competition, hence why for a firm to be punished for any form of anti-competitive behavior they generally need to be a monopoly or a dominant firm in a duopoly or oligopoly who has significant influence over the market.
When comparing the models, the oligopoly theory suggest that the Bertrand industries are more competitive than Cournot industries. This is because quantities in the Cournot model are considered as strategic substitutes; that is, the increase in quantity level produced by a firm is accommodated by the rival, producing less.