An oligopoly market occurs when the market is comprised of a few large companies that dominate an entire industry. Occasionally, a new company makes an appearance in this industry, but entry is very difficult. This differs from a perfect competition market in that they have price control, although it is limited somewhat by consumer demand. It differs from monopolistic competition in that these companies are large firms, and in monopolistic competition the firms are small. Knowing the differences between the markets is very helpful to me as a consumer. It will help me make smart decisions in my purchases, and to know in what industries I will have more choices and price options.
The main ideas behind game theory is that individuals are out for their own personal advantage, and so they all look out to further their own interests in the market. This theory developed through a theory by watching poker games, and how each player looks out for the best moves for themselves only. This was then applied to how individuals lived their lives and make decisions in the market. It looks at how people seek out the best possible action, taking into consideration how their rivals will react. The payoff matrix is a set of decisions or strategy that each individual can make and it’s various outcomes/following “moves”. Once a decision is made, it produces a specific outcome, but if that decision is altered, the outcome is also altered, and the next “move” is affected as well.
Collusive actions are when suppliers agree to set a price of a product or the amount of that product that each will produce. Cartel actions exist when there is a formal cooperation between firms acting in unison.
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