Answer to Question #225902 in Microeconomics for Devil

Question

(a) Define oligopoly & its features. Discuss the nature of kinked Demand Curve. 

 (b) Show game theory under oligopolistic market.

Answer 1

Oligopoly is a term that is used to refer a market structure dominated by few big firms. These firms have the following features. First, they enjoy the monopolistic power because they have a large market share. Second, they have large number of consumers due to the demand of their products. Third, firm sell homogenous products. Finally, firms under oligopoly market are interdependent that means a change in one of the firms influences the others. The kinked demand curve is mostly associated with oligopolistic market. A kinked demand occurs when the price of the commodities is not the dominant factor factor and the demand curve keep changing since the competitors will adopt new prices. Game theory occurs when people keep on checking on the actions of their competitors. For example, in oligopolistic market firms will keep checking whether there are rivals in the market and figuring what the rival competitors are doing ;therefore choosing the best response to continue remaining relevant in the market.