Price determination under oligopoly

Destination Control Statement Any of various statements that the U. But this does not mean that the dominant firm charges the same price that is charged by a monopolist operating in the same market. This portion of its demand curve is relatively inelastic. Conditions Favouring Stability Strategy Stability strategy does entail changing the way the business is run, however, the range of products offered and the markets served remain unchanged or narrowly focused.

Financial Strategy The way in which the firm pursues its financial objectives. Specifically the Heirfindahl index usesinformation on all the firms in the industry- not just the share of the market by thelargest 4, 8, 12 firms in the market.

Indirect Costs of Financial Distress Costs of financial distress that are indirectly incurred prior to formal bankruptcy or liquidation.

Price Determination under Oligopoly: Non-Collusive and Collusive

However, the monopoly firm, facing a downward-slopingdemand curve see Figure has power to control the price of its product. Therefore, a monopolist, in hispricing decisions, cannot consider the pricing decision of rival firms.

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Furthermore, in fish markets, it is quiteeasy for consumers to compare prices. Suppose the dominant firm sets the price OP. European Option An option that can be exercised only at expiration. In the case of differentiated products, prices can be also uniform.

If the cost of different firms in same, thin the agreed uniform price will be the monopoly price. The one who studies Contrast with forward premium. These give the percentage of total industry sales of 4, 8, orPricing Under Monopolisticand OligopolisticCompetition largest firms in the industry.

It will be pooled into a fund and distributed by the cartel board according to the agreement arrived at by the two firms at the time of the formation of the cartel. Each firm will be asked to produce that much output at which MC of each firm is equal to the MC of total equilibrium output.

Free Entry and Exit: The industry is in a mature stage with few or no growth prospects and the firm is currently in a comfortable position in the industry Rationale for Using Stability Strategy There are a number of circumstances in which the most appropriate growth stance for a company is stability rather than growth.

Force Majeure The title of a standard clause in marine contracts exempting the parties for non-fulfillment of their obligations as a result of conditions beyond their control, such as Acts of God, war.

But this is only a theoretical possibility in the short-run because in practice the joint profit maximisation objective cannot be achieved by a cartel.

The agreement between oligopolist are generally tacit or secret. The price of the product determines the policy of the cartel. Such secret dealings by firms to raise their own profits tend to break down the cartel. On the other hand, production processes like foodprocessing, textiles, garments, wood and furniture, it is relatively easy to enter themarket as a supplier — for example, capital requirements are low and sunk costs arealso low.

A cartel is an association of independent firms within the same industry. Private individuals or organizations may file lawsuits for triple damages for antitrust violations and, depending on the law, recover attorneys fees and costs expended on prosecution of a case.

The MC curves of all the small firms combined laterally establish their aggregate supply curve. MONOPOLISTIC COMPETITION Edward Chamberlin, who developed the model of monopolistic competition, observed that in a market with large number of sellers, the products of individual firms are not at all homogeneous, for example, soaps used for personal wash.

The study of problem facing the distribution of these major three products (kerosene, diesel and gasoline) is necessitated by the heavy dependence of automobiles, industries, plants and machines as well as reliance of households on them for cooking, lighting and sometimes as first aid.

Published: Mon, 5 Dec When there is competition in firms on the basis of change in price, it is known as price competition. Price competition can involve discounting the price of a product (or range of products) to increase its demand.

Generally large firms with a sizeable portfolio of businesses do not usually depend on the stability strategy as a main route, though they may use it under certain special circumstances. In this article we will discuss about Non-Collusive and Collusive Price Determination under Oligopoly.

The Sweezy Model of Kinked Demand Curve (Rigid Prices) (Non-Collusive Oligopoly): In his article published inProf. Sweezy presented the kinked demand curve analysis to explain price rigidities often observed in oligopolistic markets. Download chapter wise important exam questions and answers Assignments of Economics, CBSE Class 12 Economics Questions for Forms of Market and Price Determination.

CBSE Assignment for Class XII Economics. Prepared by teachers of one of the best CBSE schools in Delhi.

Price fixing

Based on CBSE and CCE guidelines. The students should practice these assignments to gain perfection which will.

Price determination under oligopoly
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CBSE Class 12 Economics Questions for Forms of Market and Price Determination