Answer to Question #231633 in Microeconomics for Budddy

Question

Identify factors that encourage firms to collude indirectly in an oligopoly market. Build a case study in the context of Nigeria, or your resident country. 

Answer 1

Solution:

Oligopoly is a market structure that is characterized by few dominant firms, who together have substantial influence over the market or industry.

 

The factors that encourage firms to collude indirectly in an oligopoly market are:

·        To increase their prices in order to obtain a higher economic profit.

·        To limit competition in the market.   

·        To gain a huge market share.        

·        To control the market.