Why is the economic analysis of oligopoly so difficult? What two generalizations can be made about the pricing behavior of monopolists?

What will be an ideal response?


Oligopoly is hard to analyze because it covers many different market situations. There are both homogeneous and differentiated oligopolies. The number of firms that dominate oligopolies can vary substantially, for example from two or three firms to ten firms. Mutual interdependence among rivals also makes it difficult to estimate a demand curve for a firm. Each firm must consider the reaction of rivals in establishing its price policy.
Despite the difficulties of analyzing oligopolies, two important generalizations can be made about this market structure. First, oligopolies tend to have inflexible prices. Second, oligopolies tend to change price simultaneously.

Economics

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Economics