{"id":1219,"date":"2015-05-11T23:31:06","date_gmt":"2015-05-11T23:31:06","guid":{"rendered":"https:\/\/courses.candelalearning.com\/masterymicro1xngcxmaster\/?post_type=chapter&p=1219"},"modified":"2016-03-21T19:16:31","modified_gmt":"2016-03-21T19:16:31","slug":"why-it-matters-11","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/atd-herkimer-microeconomics\/chapter\/why-it-matters-11\/","title":{"raw":"Why It Matters: Oligopoly","rendered":"Why It Matters: Oligopoly"},"content":{"raw":"

Why analyze a firm's profit maximizing strategies under conditions of oligopoly?<\/h2>\r\nThink about the purchases you make. \u00a0Perhaps you\u2019re buying groceries. Perhaps you\u2019re going out to the movies or dinner. Maybe you\u2019re making airline reservations for a trip. Maybe you\u2019re buying a new car. Almost certainly, the industries you are doing business with are imperfectly competitive. They consist of more than one firm, but less than the large number required for perfect competition. Each firm has some degree of market power, but none can ignore what other firms in the industry are doing.\r\n\r\n[caption id=\"attachment_2229\" align=\"aligncenter\" width=\"621\"]\"Four<\/a> Airline Collage.<\/strong> United<\/a> by Lars Steffans, CC-BY-SA<\/a>. American Airlines 2 <\/a>by Aero Icarus, CC-BY-SA<\/a>.. Delta<\/a> by Ikarasra, CC-BY<\/a>. Southwest Airlines<\/a> by Aero Icarus, CC-BY-SA<\/a>.[\/caption]\r\n\r\n \r\n\r\nImperfectly competitive industries fall into one of two categories, either oligopoly or monopolistic competition. In this module, we discuss oligopoly, the market structure which is most like monopoly. \u00a0In the next module, we\u2019ll discuss monopolistic competition, which is closer to perfect competition.\r\n\r\nMost of the firms that get talked about as \u201cmonopolies\u201d today or that regulatory authorities pursue antitrust activities against are actually oligopolies, firms that have only a limited number of competitors. There are quite a few industries in the U.S. that are oligopolistic. Think about rental cars, or car manufacturers, or newspapers, or internet service providers.\r\n\r\nHere are some questions to think about as you work through this module:\r\n
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  • Why does an oligopoly like Microsoft make large economic profits, while an oligopoly like United Airlines barely breaks even?<\/li>\r\n\t
  • Why are economy seats essentially the same price as they were a decade or two ago, when the prices of most things have gone up?<\/li>\r\n\t
  • Why do airlines offer frequent flyer clubs?<\/li>\r\n<\/ul>\r\nThese are just some of the questions you\u2019ll be able to answer by the end of our study of imperfect competition.\r\n