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Four Market Model Summary: Oligopoly definitions

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  • Oligopoly
    A market structure with few firms, high entry barriers, and firms that influence price and output through strategic interactions.
  • Market Power
    The ability of a firm to influence the price and output levels in its market, often resulting in long-run profitability.
  • Barriers to Entry
    Obstacles that prevent new firms from easily entering an industry, maintaining the dominance of existing firms.
  • Game Theory
    A framework for analyzing strategic interactions where the outcome for each participant depends on the actions of others.
  • Interdependence
    A situation where each firm's decisions affect and are affected by the actions of rival firms in the market.
  • Downward-Sloping Demand Curve
    A graphical representation showing that as price decreases, quantity demanded increases, typical in imperfect competition.
  • Marginal Cost
    The additional expense incurred from producing one more unit of output, crucial for profit-maximizing decisions.
  • Marginal Revenue
    The extra income received from selling one more unit, always below price in markets with downward-sloping demand.
  • Profit Maximizing Output
    The quantity of production where firms achieve the highest possible profit, often requiring strategic consideration in oligopolies.
  • Long-Run Profitability
    The sustained ability of firms to earn profits over time due to limited competition and high entry barriers.
  • Price Setting
    The process by which firms determine the selling price of their goods, often influenced by competitors’ actions.
  • Imperfect Competition
    A market scenario where individual firms have some control over price, unlike perfect competition.
  • Market Structure
    The organizational and competitive characteristics of a market, such as the number of firms and entry barriers.
  • Monopoly
    A market with a single firm, serving as a contrast to oligopoly, where only one seller dominates.
  • Perfect Competition
    A market structure with many firms, identical products, and no barriers to entry, leading to price equaling marginal cost.