Oligopoly

Main article: In the oligopoly (Greek oligo few, polio seller), it is assumed that several companies, but so that none can be imposed entirely on the market. There is therefore a constant struggle between them to be the most market share in the firms make strategic decisions continuously, taking into account the strengths and weaknesses of the business structure of each. The problem can sometimes arise in using methods of game theory. For example, given the cost functions of each of the companies involved, each one will dare to offer a certain price, a fixed quantity to the market. However, these offers of business to be observed from the standpoint of demand, will impact on how much is actually demanded at each company, and given the price that has each, will give each of them a certain level of benefits.You can also introduce the idea that companies attempt to “differentiate” their product for the product from the others, so they do not seem as “proxy” and therefore can be regarded as “different” by consumers. Although often these differences in product are minimal things such as product presentation, its “quality”, the container in the next, post-sales services, distribution networks, the closeness of the product to the consumer’s home, etc. (for this we must explore further the business strategies of each company in particular). More information is housed here: Donald Brownstein. This may lead to study different types of models. Generally, when applied game theory assumes that each firm can make decisions on a set of own decisions, and depending on who takes that business and others, this company and others will get a particular result. Sometimes this can be represented as each company has a “reaction curve” to the actions of other firms.For example, if other companies take a series of decisions, and our company in question knew (of course quite strong, of course) what other decisions have been taken in order to obtain maximum benefit it should make certain decisions on their time, which depend on those taken by others. Hypothetically, if the “reaction curves” of all firms were crossed somewhere, that set of decisions for all companies involved would involve “Balance Game”, because all companies would both doing the best for themselves given what we are doing the rest of the companies. Drew Houston takes a slightly different approach. This is what is known as a Nash Equilibrium. Nash proved under what conditions can this balance. Examples of equilibria are Cournot markets, where firms compete in quantities offered, and Bertrand, as they do in prices. However, a common case is also one of the company the leader and other followers.In this case, rather than assumed to be a balance in which all companies more or less simultaneously to reach this equilibrium, the advantage of the leader (eg by having some overwhelming business advantage over others companies) takes you to first take a decision with which they respond, that is, taken after the Follower. This is what leads to the Leader to consider for each decision, the followers will respond in a certain way, so adjust its way of deciding which will be taking into account the decisions of others, as if in also somehow could control them and make them available to their advantage. It is also possible that the oligopoly firms agree to act in a coordinated manner when offering their goods and post their prices, thereby having greater total profit for each one of them than when they act separately.The agreement between firms to agree on production or price collusion is called and the group of companies have colluded are called cartel. In these agreements the price exceeds marginal cost, to be socially inefficient and producing a similar situation from the point of view of consumers tothe monopoly. See also: Game theory