What is meant by an oligopoly being both interdependent and uncertain in their price strategies?

Oligopolies are interdependant as the success of their price strategy relies on the reaction of other oligopoly firms in the market. If an oligopoly decided to increase the price of it's output, they would only experience increased revenue if the other firms also increased their price, making the firm dependant on the others.

The aspect of uncertainty follows a similar theory; oligopolies are never certain of how rivals will react - even in the case of collusion. It would be in all firms' best interest to increase their prices as this will also increase everyones revenue, however this is unlikely due to uncertainty. If all firms decided to increase their price but one firm changed their mind, that one firm would capture the market share of all the others as well as taking their revenue potential. This therefore means prices are likely to be stable in oligpolostic markets.

RB
Answered by Reubin B. Economics tutor

29049 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

How would you structure a 25 mark essay question? For example if the question was " how will an increase in interest rates affect the rental market?"


Describe the market structure for the supermarket industry in the UK. Give reasons for your answer.


Explain what is meant when it is said that there are inefficiencies in the production of goods and the allocation of resources.


Could you explain the distribution of the incidence of a tax and why it may fall differently on consumers and producers?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences