Question

To what extent the output decision making under oligopolistic market structure is interdependent, but not independent?

Answer 1

Answer -

The output decesion making under oligopolistic market structure is interdependent but not independent due to following reasons.

1.In oligopoly there is possibility of different behaviour patterns.,when rivals decided to enter in to an agreement for deciding output ,this agreement may failed or ended because of their different behaviour and attitudes.There is not any single model for determining output analysis in oligopoly.

2.In oligopoly overall decesion making about price and outputs is dependent upon actions and reactions of rival firms.The decision related to output is also depends upon the rivals output strategy.so these firms can't have a definite demand curve,always facing with indefinite demand curve.

3.Like monopolist or perfect competition profit maximization is not the main aim of oligopoly.There will be other aims like sales maximization , product securities etc.This resulted in to interdependence about output analysis.

4..Price Rigidity - once a price determines in the market it will continues from year to year in spite of change in cost and demand so there is no preference is given for independent output strategy.

5 .Non price competetion - It includes competetion regarding changes in design and advertising etc.As price remains stable for many years decesion regarding production will taken collectively .

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