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Oligopoly
• It is a market form in which there are few sellers
of homogenous or differentiated products
• If the commodity is homogenous then its is pure
Oligopoly and if differentiated product then
differentiated Oligopoly
• Oligopoly model fits well into industries such as
Automobile, Manufacturing of Electrical
Appliances etc.
Features of Oligopoly
• Few Sellers
• Interdependence
• Uncertainty
• Remain independent in decision making
• Indeterminateness
Collusive & Non Collusive
Oligopoly
• Firms tend to invest heavily in new machinery
& processes to try & reduce their cost & make
more profit
D
D
D
Price
T T
Price
Da
Db Db
O O
X M X
Quality
Quality
Kinked Demand curve
• Due to dependency and uncertainty a sp e ct, oligopoly le a ds to
inde te rminate ne s s of de ma nd curve
• There are 2 demand curve s in the diagram. DDa of firm A and DDb of
firm B. DDa is e la s tic and DDb is le s s e la s tic.
• The TD part of demand curve is more ela stic and the TDb part is
inela s tic
• Kinky Demand Curve is obtained by taking TD part from A and TDb part
of firm B