Competition, Monopolies, and cartels o The duopolists may agree on a monopoly outcome ● Collusion The two firms may agree on the quantity to produce and the price to charge Cartel The two firms may join together and act in unison
Competition, Monopolies, and Cartels • The duopolists may agree on a monopoly outcome. • Collusion – The two firms may agree on the quantity to produce and the price to charge. • Cartel – The two firms may join together and act in unison
Competition, Monopolies, and cartels Although oligopolists would like to form cartels and earn monopoly profits, often that is not possible. Antitrust laws prohibit explicit agreements among oligopolists as a matter of public policy
Competition, Monopolies, and Cartels • Although oligopolists would like to form cartels and earn monopoly profits, often that is not possible. Antitrust laws prohibit explicit agreements among oligopolists as a matter of public policy
The Equilibrium for an Oligopoly o A Nash equilibrium is a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the others have chosen When firms in an oligopoly individually choose production to maximize prof ofit, they y produce quantity of output greater than the level produced by monopoly and less than the level produced by competition
The Equilibrium for an Oligopoly • A Nash equilibrium is a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the others have chosen. • When firms in an oligopoly individually choose production to maximize profit, they produce quantity of output greater than the level produced by monopoly and less than the level produced by competition