Chapter 17: Oligopolies

Chapter 17 is all about oligopolies and the certain characteristics this market has compared to monopolies and perfect competitive market. As mentioned before, oligopolies are more similar to monopolies since a small group of firms controls 50 or more percent of the market. In addition, the price is always above marginal revenue, except over a period of time when more sellers enter the market. When more sellers enter the market, the price gets closer to marginal cost and the socially optimal quantity is produced, turning the market into a competitive market. A major problem that occurs with oligopolies is that cartels can be formed, producing a form of cheating. A firm is able to cheat the other seller in the compromise due to self-interest and the incentive provided. A good way at looking at these situations is through the idea of a mind-game.  The game being described is similar to choosing the dominant or most self-interested option. The game can be figured out through the charts presented in the books.