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Four Market Model Summary: Oligopoly definitions

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  • Oligopoly
    A market structure with a small number of firms, each possessing significant influence over price and output.
  • Barriers to Entry
    Obstacles that prevent new firms from entering a market, often resulting in limited competition.
  • Market Power
    The ability of firms to control prices and output levels due to limited competition.
  • Demand Curve
    A graphical representation showing how quantity demanded varies with price, typically downward sloping in this context.
  • Marginal Revenue
    The additional income received from selling one more unit, always below price in this market structure.
  • Marginal Cost
    The extra expense incurred from producing one additional unit, often less than price in this market.
  • Profit Maximization
    A process involving strategic decisions based on competitors’ actions rather than simple cost-revenue comparisons.
  • Long Run Profitability
    The potential for sustained earnings over time due to limited competition and high entry barriers.
  • Game Theory
    A framework used to analyze strategic interactions among firms, crucial for understanding decision-making.
  • Interdependence
    A situation where each firm’s actions affect and are affected by the decisions of other firms in the market.
  • Perfect Competition
    A contrasting market structure with many firms, no barriers, and price equaling marginal cost.
  • Monopoly
    A market structure with a single firm, resulting in no competition and maximum market power.
  • Strategic Pricing
    Setting prices based on anticipated reactions of competitors rather than solely on cost considerations.
  • Output
    The quantity of goods produced and supplied by firms, influenced by market power and competition.
  • Average Revenue
    The revenue earned per unit sold, represented by the demand curve and always above marginal revenue in this market.