savio13
Savio Cabral
Uncertainty: Interdependence on other firms for one’s own decision creates an atmosphere of uncertainty about the output and price. If an oligopolist increases his output to capture the larger portion of the market, others too will react in a similar way. In case he increases the price others are unlikely to do so.
Indeterminateness: The demand curve faced by an oligopolist is indeterminate. Under perfect competition a firm being one of the large number of firms, has a perfectly elastic( horizontal) demand curve. Here the firm is a price taker from the market. A monopolist, being a single seller is in a position to decide the price and thus produce and sell the output accordingly. His demand curve is therefore definite in the form of downward sloping demand curve.
Non-Price Competition: In an oligopoly market, price remains rigid. This is due to the fear about the reaction of their rivals. An increase in price would not be responded to but any decrease will be followed by similar or at times a larger reduction in price. Such fears make a firm stick to a particular price without further changes in order to avoid a possible price war.
Indeterminateness: The demand curve faced by an oligopolist is indeterminate. Under perfect competition a firm being one of the large number of firms, has a perfectly elastic( horizontal) demand curve. Here the firm is a price taker from the market. A monopolist, being a single seller is in a position to decide the price and thus produce and sell the output accordingly. His demand curve is therefore definite in the form of downward sloping demand curve.
Non-Price Competition: In an oligopoly market, price remains rigid. This is due to the fear about the reaction of their rivals. An increase in price would not be responded to but any decrease will be followed by similar or at times a larger reduction in price. Such fears make a firm stick to a particular price without further changes in order to avoid a possible price war.