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| | When you have experienced a massage previously, you are aware of how your muscle tissues can relax and get back again manage. If you're unfamiliar with massages, the following tips can help you have a fantastic very first [http://www.twitpic.com/tag/time+experience time experience]. This post is here to provide you a great massage therapy.<br><br>One simple approach to offer a restorative massage is by using a "raking" strategy. This is achieved by scattering your fingers and taking advantage of your disposal. Begin in the shoulder area then shift your hands within a raking motion on the back. Ensure that the hands and fingers transfer down the spine not on the top of the backbone. Whilst one hands moves up shift other one down in alternating action.<br><br>A great way to give a calming massage is to utilize a method named "raking". Inside, you merely manage your hands (distribute palms) on the person's back, delicately relocating backwards and forwards. Definitely, you're performing a raking action up and down. For added outcome, try out switching both your hands - a single rakes up whilst the other rakes down.<br><br>When organizing to acquire a therapeutic massage, try to eat quite casually at the most prior to deciding to appear. By eating a lot of well before your massage therapy, you have the potential risk of getting uncomfortable and ruining the knowledge. You should take in one thing wholesome so that you can come with an pleasant time.<br><br>Request all the questions you must. There are actually no stupid inquiries, and your massage therapist must be happy to respond to them. Your comfort may be the greatest aim, so check with any questions to find out what you ought to know.<br><br>Keep hug methods can help with shoulder joint anxiety. Use your hands to produce an by over your chest area. Massage shoulders, one at a time. This is an easy way to relieve stress. 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They may have injuries and when the massage therapy is agonizing, you need to end.<br><br>Be singing with your masseuse.Talking might be the final thing you want to do throughout a restorative massage, but it can be the main difference in between an okay practical experience and a excellent one. You need to allow the therapist determine what locations will need operate and what strategies perform best.<br><br>Take note of the way your lover does respond throughout a therapeutic massage. Should your companion tenses up, you are probably kneading her or him in a way that is simply too extreme. When your lover seems to feel tickled, you might be going as well light along with your fingertips. Focusing can aid you to choose the right stability that can definitely make sure you your spouse.<br><br>Should you suffer from health conditions for example elevated blood pressure or are expecting a baby, communicate up just before getting your restorative massage. 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| An '''oligopoly''' is a [[market form]] in which a [[market]] or [[industry]] is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher costs for consumers.<ref>http://www.ftc.gov/bc/edu/pubs/consumer/general/zgen01.shtm</ref>
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| With few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm therefore influence and are influenced by the decisions of other firms. [[Strategic planning]] by oligopolists needs to take into account the likely responses of the other market participants.
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| ==Description==
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| Oligopoly is a common market form where a small number of firms are in competition. As a quantitative description of oligopoly, the four-firm [[concentration ratio]] is often utilized. This measure expresses the market share of the four largest firms in an industry as a percentage. For example, as of fourth quarter 2008, Verizon, AT&T, Sprint, and T-Mobile together control 89% of the US cellular phone market.{{Citation needed|date=January 2014}}
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| Oligopolistic [[competition]] can give rise to a wide range of different outcomes. In some situations, the firms may employ restrictive trade practices ([[collusion]], market sharing etc.) to raise prices and restrict production in much the same way as a [[monopoly]]. Where there is a formal agreement for such collusion, this is known as a [[cartel]]. A primary example of such a cartel is [[OPEC]] which has a profound influence on the international price of oil.
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| Firms often collude in an attempt to stabilize unstable markets, so as to reduce the risks inherent in these markets for investment and product development.{{Citation needed|date=February 2010}} There are legal restrictions on such collusion in most countries. There does not have to be a formal agreement for collusion to take place (although for the act to be illegal there must be actual communication between companies)–for example, in some industries there may be an acknowledged market leader which informally sets prices to which other producers respond, known as [[price leadership]].
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| In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching [[perfect competition]]. The competition in an oligopoly can be greater when there are more firms in an industry than if, for example, the firms were only regionally based and did not compete directly with each other.
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| Thus the [[Welfare Economics|welfare]] analysis of oligopolies is sensitive to the parameter values used to define the market's structure. In particular, the level of [[dead weight loss]] is hard to measure. The study of [[product differentiation]] indicates that oligopolies might also create excessive levels of differentiation in order to stifle competition.
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| Oligopoly theory makes heavy use of [[game theory]] to model the behavior of oligopolies:
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| * [[Heinrich Freiherr von Stackelberg|Stackelberg]]'s [[duopoly]]. In this model the firms move sequentially (see [[Stackelberg competition]]).
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| * [[Antoine Augustin Cournot|Cournot]]'s duopoly. In this model the firms simultaneously choose quantities (see [[Cournot competition]]).
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| * [[Joseph Louis François Bertrand|Bertrand]]'s oligopoly. In this model the firms simultaneously choose prices (see [[Bertrand competition]]).
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| ==Characteristics==
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| ;Profit maximization conditions: An oligopoly [[profit maximization|maximizes profits]] .
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| ;Ability to set price: Oligopolies are [[price setter]]s rather than price takers.<ref name=Perloff_445>Perloff, J. ''Microeconomics Theory & Applications with Calculus''. page 445. Pearson 2008.</ref>
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| ;Entry and exit: Barriers to entry are high.<ref name=Hirschey_451>Hirschey, M. ''Managerial Economics''. Rev. Ed, page 451. Dryden 2000.</ref> The most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. Additional sources of barriers to entry often result from government regulation favoring existing firms making it difficult for new firms to enter the market.<ref name="ReferenceA">Negbennebor, A: Microeconomics, The Freedom to Choose CAT 2001{{page needed|date=September 2010}}</ref>
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| ;Number of firms: "Few" – a "handful" of sellers.<ref name=Hirschey_451/> There are so few firms that the actions of one firm can influence the actions of the other firms.<ref>Negbennebor, A: Microeconomics, The Freedom to Choose page 291. CAT 2001</ref>
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| ;Long run profits: Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits.
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| ;Product differentiation: Product may be homogeneous (steel) or differentiated (automobiles).<ref name="ReferenceA"/>
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| ;Perfect knowledge: Assumptions about [[perfect knowledge]] vary but the knowledge of various economic factors can be generally described as selective. Oligopolies have perfect knowledge of their own cost and demand functions but their inter-firm information may be incomplete. Buyers have only imperfect knowledge as to price,<ref name=Hirschey_451/> cost and product quality.
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| ;Interdependence: The distinctive feature of an oligopoly is [[interdependence]].<ref>Melvin & Boyes, Microeconomics 5th ed. page 267. Houghton Mifflin 2002</ref> Oligopolies are typically composed of a few large firms. Each firm is so large that its actions affect market conditions. Therefore the competing firms will be aware of a firm's market actions and will respond appropriately. This means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and the firm's countermoves.<ref name=Colander_288>Colander, David C. Microeconomics 7th ed. Page 288 McGraw-Hill 2008.</ref> It is very much like a game of chess or pool in which a player must anticipate a whole sequence of moves and countermoves in determining how to achieve his or her objectives. For example, an oligopoly considering a price reduction may wish to estimate the likelihood that competing firms would also lower their prices and possibly trigger a ruinous price war. Or if the firm is considering a price increase, it may want to know whether other firms will also increase prices or hold existing prices constant. This high degree of interdependence and need to be aware of what other firms are doing or might do is to be contrasted with lack of interdependence in other market structures. In a [[perfectly competitive]] (PC) market there is zero interdependence because no firm is large enough to affect market price. All firms in a ''PC'' market are price takers, as current market selling price can be followed predictably to maximize short-term profits. In a monopoly, there are no competitors to be concerned about. In a monopolistically-competitive market, each firm's effects on market conditions is so negligible as to be safely ignored by competitors.
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| ;Non-Price Competition: Oligopolies tend to compete on terms other than price. Loyalty schemes, advertisement, and product differentiation are all examples of non-price competition.
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| ==Modeling==
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| There is no single model describing the operation of an oligopolistic market.<ref name=Colander_288/> The variety and complexity of the models is because you can have two to 10 firms competing on the basis of price, quantity, technological innovations, marketing, advertising and reputation. Fortunately, there are a series of simplified models that attempt to describe market behavior by considering certain circumstances. Some of the better-known models are the [[dominant firm model]], the [[Cournot-Nash model]], the [[Bertrand model]] and the [[kinked demand]] model.
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| ===Cournot-Nash model===
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| {{Main|Cournot competition}}
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| The [[Cournot]]-[[John Nash (mathematician)|Nash]] model is the simplest oligopoly model. The model assumes that there are two “equally positioned firms”; the firms compete on the basis of quantity rather than price and each firm makes an “output decision assuming that the other firm’s behavior is fixed.”<ref>This statement is the Cournot conjectures. Kreps, D.: A Course in Microeconomic Theory page 326. Princeton 1990.</ref> The market demand curve is assumed to be linear and marginal costs are constant. To find the Cournot-Nash equilibrium one determines how each firm reacts to a change in the output of the other firm. The path to equilibrium is a series of actions and reactions. The pattern continues until a point is reached where neither firm desires “to change what it is doing, given how it believes the other firm will react to any change.”<ref>Kreps, D. ''A Course in Microeconomic Theory''. page 326. Princeton 1990.</ref> The equilibrium is the intersection of the two firm’s reaction functions. The reaction function shows how one firm reacts to the quantity choice of the other firm.<ref>Kreps, D. ''A Course in Microeconomic Theory''. Princeton 1990.{{page needed|date=September 2010}}</ref> For example, assume that the firm 1’s demand function is P = (M - Q<sub>2</sub>) - Q<sub>1</sub> where Q<sub>2</sub> is the quantity produced by the other firm and Q<sub>1</sub> is the amount produced by firm 1,<ref>Samuelson, W & Marks, S. ''Managerial Economics''. 4th ed. Wiley 2003{{page needed|date=September 2010}}</ref> and M=60 is the market. Assume that marginal cost is C<sub>M</sub>=12. Firm 1 wants to know its maximizing quantity and price. Firm 1 begins the process by following the profit maximization rule of equating marginal revenue to marginal costs. Firm 1’s total revenue function is R<sub>T</sub> = Q<sub>1</sub> P= Q<sub>1</sub>(M - Q<sub>2</sub> - Q<sub>1</sub>) = M Q<sub>1</sub>- Q<sub>1</sub> Q<sub>2</sub> - Q<sub>1</sub><sup>2</sup>. The marginal revenue function is <math>R_M = \frac{\partial R_T}{\partial Q_1} = M - Q_2 - 2Q_1</math>.<ref group="note">R<sub>M</sub> = M - Q<sub>2</sub> - 2Q<sub>1</sub>. can be restated as <math>R_M = (M - Q_2) - 2Q_1</math> R<sub>M</sub> = (M - Q<sub>2</sub>) - 2Q<sub>1</sub>.</ref>
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| :R<sub>M</sub> = C<sub>M</sub>
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| :M - Q<sub>2</sub> - 2Q<sub>1</sub> = C<sub>M</sub>
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| :2Q<sub>1</sub> = (M-C<sub>M</sub>) - Q<sub>2</sub>
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| :Q<sub>1</sub> = (M-C<sub>M</sub>)/2 - Q<sub>2</sub>/2 = 24 - 0.5 Q<sub>2</sub> [1.1]
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| :Q<sub>2</sub> = 2(M-C<sub>M</sub>) - 2Q<sub>2</sub> = 96 - 2 Q<sub>1</sub> [1.2]
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| Equation 1.1 is the reaction function for firm 1. Equation 1.2 is the reaction function for firm 2.
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| To determine the Cournot-Nash equilibrium you can solve the equations simultaneously. The equilibrium quantities can also be determined graphically. The equilibrium solution would be at the intersection of the two reaction functions. Note that if you graph the functions the axes represent quantities.<ref>Pindyck, R & Rubinfeld, D: Microeconomics 5th ed. Prentice-Hall 2001{{page needed|date=September 2010}}</ref> The reaction functions are not necessarily symmetric.<ref>Pindyck, R & Rubinfeld, D: Microeconomics 5th ed. Prentice-Hall 2001</ref> The firms may face differing cost functions in which case the reaction functions would not be identical nor would the equilibrium quantities.
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| ===Bertrand model===
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| {{Main|Bertrand competition}}
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| The Bertrand model is essentially the Cournot-Nash model except the strategic variable is price rather than quantity.<ref name=Samuelson_415>Samuelson, W. & Marks, S. ''Managerial Economics''. 4th ed. page 415 Wiley 2003.</ref>
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| The model assumptions are:
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| *There are two firms in the market
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| *They produce a homogeneous product
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| *They produce at a constant marginal cost
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| *Firms choose prices P<sub>A</sub> and P<sub>B</sub> simultaneously
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| *Firms outputs are perfect substitutes
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| *Sales are split evenly if P<sub>A</sub> = P<sub>B</sub><ref>There is nothing to guarantee an even split. Kreps, D.: A Course in Microeconomic Theory page 331. Princeton 1990.</ref>
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| The only Nash equilibrium is P<sub>A</sub> = P<sub>B</sub> = MC.
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| Neither firm has any reason to change strategy. If the firm raises prices it will lose all its customers. If the firm lowers price P < MC then it will be losing money on every unit sold.<ref>This assumes that there are no capacity restriction. Binger, B & Hoffman, E, 284-85. Microeconomics with Calculus, 2nd ed. Addison-Wesley, 1998.</ref>
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| The Bertrand equilibrium is the same as the competitive result.<ref>Pindyck, R & Rubinfeld, D: Microeconomics 5th ed.page 438 Prentice-Hall 2001.</ref> Each firm will produce where P = marginal costs and there will be zero profits.<ref name=Samuelson_415/> A generalization of the Bertrand model is the [[Bertrand-Edgeworth Model]] that allows for capacity constraints and more general cost functions.
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| ===Kinked demand curve model===
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| {{Main|Kinked demand}}
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| According to this model, each firm faces a demand curve kinked at the existing price.<ref name=Pindyck_446>Pindyck, R. & Rubinfeld, D. ''Microeconomics'' 5th ed. page 446. Prentice-Hall 2001.</ref> The conjectural assumptions of the model are; if the firm raises its price above the current existing price, competitors will not follow and the acting firm will lose market share and second if a firm lowers prices below the existing price then their competitors will follow to retain their market share and the firm's output will increase only marginally.<ref>Simply stated the rule is that competitors will ignore price increases and follow price decreases. Negbennebor, A: Microeconomics, The Freedom to Choose page 299. CAT 2001</ref>
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| If the assumptions hold then:
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| *The firm's marginal revenue curve is discontinuous (or rather, not differentiable), and has a gap at the kink<ref name=Pindyck_446/>
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| *For prices above the prevailing price the curve is relatively elastic <ref name=Negbennebor_299>Negbennebor, A. ''Microeconomics: The Freedom to Choose''. page 299. CAT 2001</ref>
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| *For prices below the point the curve is relatively inelastic <ref name=Negbennebor_299/>
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| The gap in the marginal revenue curve means that marginal costs can fluctuate without changing equilibrium price and quantity.<ref name=Pindyck_446/> Thus prices tend to be rigid.
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| ==Examples==
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| In industrialized economies, [[barriers to entry]] have resulted in oligopolies forming in many sectors, with unprecedented levels of competition fueled by increasing [[globalization]]. Market shares in an oligopoly are typically determined by product development and advertising. For example, there are now only a small number of manufacturers of civil passenger aircraft, though Brazil ([[Embraer]]) and Canada ([[Bombardier Aerospace|Bombardier]]) have participated in the small passenger aircraft market sector. Oligopolies have also arisen in heavily-regulated markets such as wireless communications: in some areas only two or three providers are licensed to operate. | |
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| ===Australia===
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| *Most media outlets are owned either by [[News Corporation]], [[Time Warner]], or by [[Fairfax Media]]<ref>{{citation| date=October 2008 | publisher=Datamonitor| title=Media Industry Profile: Australia}}{{page needed|date=September 2010}}</ref>
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| *Grocery retailing is dominated by [[Coles Group]] and [[Woolworths Limited|Woolworths]]. {{Citation needed|reason=Can't find a concrete source regarding market shares on this.|date=November 2009}}
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| *Banking is dominated by [[Australia and New Zealand Banking Group|ANZ]], [[Westpac]], [[National Australia Bank|NAB]], and [[Commonwealth Bank]]. To an extent this oligopoly is enshrined in law in what is known as the "[[Four pillars policy]]", in order to ensure the stability of Australia's banking system.
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| * Most of the telecommunications in Australia is delivered by Telstra or Optus. Other brands are virtual network operators (VNO).
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| ===Canada===
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| * Six companies ([[Royal Bank of Canada]], [[Toronto Dominion Bank]], [[Bank of Nova Scotia]], [[Bank of Montreal]], [[Canadian Imperial Bank of Commerce]] and [[National Bank of Canada]]) control the banking industry.
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| * {{As of|2008}}, three companies ([[Rogers Wireless]], [[Bell Mobility]] and [[Telus Mobility]]) share over 94% of Canada's wireless market.<ref>http://cwta.ca/CWTASite/english/facts_figures_downloads/SubscribersStats_en_2008_Q4.pdf</ref><ref>http://www.crtc.gc.ca/eng/publications/reports/policymonitoring/2008/cmr2008.pdf</ref>
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| * 4 companies control the internet service provider market, ([[Rogers Communications]], [[Bell Canada]], [[Telus]], [[Shaw Communications]])
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| * 8 companies control the oil and gas market, ([[Husky Energy]], [[Imperial Oil]], [[Nexen]], [[Petro-Canada]], [[Shell Canada]], [[Suncor Energy]], [[Syncrude Canada]], [[Talisman Energy]])
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| === India===
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| * The petroleum and gas industry is dominated by [[Indian Oil Corporation|Indian Oil]], [[Bharat Petroleum]], [[Hindustan Petroleum]] and [[Reliance Petroleum|Reliance]].
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| * Most of the telecommunication in India is dominated by [[Bharti Airtel|Airtel]], Vodafone,[[Idea Cellular|Idea]], [[Reliance Communications|Reliance]]
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| ===European Union===
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| *The [[VHF Data Link]] market as air-ground part of aeronautical communications is controlled by [[ARINC]] and [[SITA]], commonly known as the organisations providing communication services for the exchange of data between air-ground applications in the Commission Regulation (EC) No 29/2009.
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| ===United Kingdom===
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| * Five banks ([[Barclays]], [[Halifax (United Kingdom bank)|Halifax]], [[HSBC]], [[Lloyds TSB]] and [[Natwest]]) dominate the UK banking sector, they were accused of being an oligopoly by the relative newcomer Virgin bank.<ref>{{citation|date=January 2011\url=http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8266582/Big-banks-running-an-oligopoly-says-Virgin-Money-chief.html|title=Big banks running an oligopoly, says Virgin Money chief
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| }}</ref>
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| *Four companies ([[Tesco]], [[Sainsbury's]], [[Asda]] and [[Morrisons]]) share 74.4% of the grocery market.<ref>{{citation|date=31 October 2007|url=http://news.bbc.co.uk/1/hi/business/4785544.stm|title=Probe says 'too few supermarkets'|publisher=BBC News|accessdate=3 April 2009}}</ref>
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| *The [[detergent]] market is dominated by two players, [[Unilever]] and [[Procter & Gamble]].<ref>{{citation| date=November 2008 | publisher=Datamonitor| title=Textile Washing Products Industry Profile: United Kingdom}}{{page needed|date=September 2010}}</ref>
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| *Six utilities ([[EDF Energy]], [[Centrica]], [[RWE npower]], [[E.on]], [[Scottish Power]] and [[Scottish and Southern Energy]]) share 99% of the retail electricity market.<ref>{{citation|date=6 July 2011|url=http://www.decc.gov.uk/en/content/cms/news/pn11_060/pn11_060.aspx|title=Huhne calls energy summit for small suppliers'|publisher=Decc}}</ref>
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| ===United States===
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| *Many media industries today are essentially oligopolies.
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| ** Six [[Major film studio|movie studios]] receive almost 87% of American film revenues. <ref>http://www.boxofficemojo.com/studio/?view=parent&view2=yearly&yr=2013&p=.htm</ref>
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| ** The television and high speed internet industry is mostly an oligopoly of seven companies: [[The Walt Disney Company]], [[CBS Corporation]], [[Viacom]], [[Comcast]], [[Hearst Corporation]], [[Time Warner]], and [[News Corporation]].<ref>{{citation|year=2008|edition=2nd|publisher=McGraw Hill|title=Rodman, George. Mass Media in a Changing World. New York}}{{page needed|date=September 2010}}</ref> See [[Concentration of media ownership]].
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| ** Four wireless providers ([[AT&T Mobility]], [[Verizon Wireless]], [[T-Mobile]], [[Sprint Nextel]]) control 89% of the cellular telephone service market.<ref>http://www.slideshare.net/chetansharma/us-wireless-market-q4-2008-and-2008-update-mar-2009-chetan-sharma-consulting</ref> This is not to be confused with cellular telephone manufacturing, an integral portion of the cellular telephone market as a whole.
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| *Healthcare insurance in the United States consists of very few insurance companies controlling major market share in most states. For example, California's insured population of 20 million is the most competitive in the nation and 44% of that market is dominated by two insurance companies, [[Anthem (insurance)|Anthem]] and [[Kaiser Permanente]].<ref>http://www.cnbc.com/id/32918263</ref>
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| *[[Anheuser-Busch]] and [[MillerCoors]] control about 80% of the beer industry.<ref>http://www.nytimes.com/2009/08/27/business/27views.html?_r=0</ref>
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| *In March 2012, the [[United States Department of Justice]] announced that it would sue six major publishers for price fixing in the sale of electronic books. The accused publishers are Apple, Simon & Schuster Inc, Hachette Book Group, Penguin Group, Macmillan, and HarperCollins Publishers.<ref>{{cite web|url=http://www.reuters.com/article/2012/03/08/us-apple-ebooks-idUSBRE82715J20120308|title=Justice Department may sue Apple, publishers on e-books|publisher=Reuters|date=8 Mar 2012|accessdate=14 Mar 2012}}</ref><ref>{{cite web|url=http://www.forbes.com/sites/timworstall/2012/03/08/now-the-justice-department-wants-to-sue-apple/|title=Now the Justice Department Wants to Sue Apple|publisher=Forbes|author=Tim Worstall|date=8 Mar 2012|accessdate=14 Mar 2012}}</ref><ref>{{cite web|url=http://online.wsj.com/article/SB10001424052970203961204577267831767489216.html|title=US Warns Apple, Publishers|publisher=Wall Street Journal|author1=Thomas Catan|author2=Jeffrey A. Trachtenberg|date=9 Mar 2012|accessdate=14 Mar 2012}}</ref>
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| ===Worldwide===
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| *The [[accountancy]] market is controlled by [[PriceWaterhouseCoopers]], [[KPMG]], [[Deloitte Touche Tohmatsu]], and [[Ernst & Young]] (commonly known as the [[Big Four auditors|Big Four]])<ref>{{citation| date=September 2008 | publisher=Datamonitor| title=Accountancy Industry Profile: Global}}{{page needed|date=September 2010}}</ref>
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| *Three leading food processing companies, [[Kraft Foods]], [[PepsiCo]] and [[Nestlé]], together achieve a large proportion{{Vague|what proportion?|date=March 2009}} of global processed food sales. These three companies are often used as an example of "[[Rule of three (economics)|Rule of three]]",<ref>{{citation|coauthors=SHETH Jagdish, SISODIA Rajendra|title=The Rule of Three|publisher=Boston Publishing.<!-- supposed to omit "Publishing Co." etc but New York:Boston would be just confusing surely -->|publication-place=New York}}{{page needed|date=September 2010}}</ref> which states that markets often become an oligopoly of three large firms.
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| *[[Boeing]] and [[Airbus]] have a duopoly over the airliner market.<ref>{{citation| date=November 2008 | publisher=Datamonitor| title=Airlines Industry Profile: United States | pages=13–14}}</ref>
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| *[[General Electric]], [[Pratt and Whitney]] and [[Rolls-Royce plc]] own more than 50% of the marketshare in the airliner engine market.{{citation needed|date=October 2011}}
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| * Three [[Credit rating agency|credit rating agencies]] (Standard & Poor's, Moody's, and Fitch Group) dominate their market and extend their crucial importance into the financial sector. See [[Big Three (credit rating agencies)]].
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| *[[Nestlé]], [[The Hershey Company]] and [[Mars, Incorporated]] together make most of the candy made worldwide.
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| * [[Microsoft]], [[Sony]], and [[Nintendo]] dominate the video game console market.
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| ==Demand curve==
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| [[Image:Kinked demand.JPG|thumb|Above the kink, demand is relatively elastic because all other firms' prices remain unchanged. Below the kink, demand is relatively inelastic because all other firms will introduce a similar price cut, eventually leading to a [[price war]]. Therefore, the best option for the oligopolist is to produce at point '''E''' which is the equilibrium point and the kink point. This is a theoretical model proposed in 1947, which has failed to receive conclusive evidence for support. | 300 px]]
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| In an oligopoly, firms operate under [[imperfect competition]]. With the fierce price competitiveness created by this [[Sticky (economics)|sticky-upward]] [[demand curve]], firms use [[non-price competition]] in order to accrue greater revenue and market share.
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| "Kinked" demand curves are similar to traditional demand curves, as they are downward-sloping. They are distinguished by a hypothesized convex bend with a discontinuity at the bend–"kink". Thus the first [[derivative]] at that point is undefined and leads to a jump discontinuity in the [[marginal revenue|marginal revenue curve]].
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| Classical [[economics|economic theory]] assumes that a profit-maximizing producer with some market power (either due to oligopoly or [[monopolistic competition]]) will set marginal costs equal to marginal revenue. This idea can be envisioned graphically by the intersection of an upward-sloping marginal cost curve and a downward-sloping marginal revenue curve (because the more one sells, the lower the price must be, so the less a producer earns per unit). In classical theory, any change in the marginal cost structure (how much it costs to make each additional unit) or the marginal revenue structure (how much people will pay for each additional unit) will be immediately reflected in a new price and/or quantity sold of the item. This result does not occur if a "kink" exists. Because of this jump discontinuity in the marginal revenue curve, [[marginal cost]]s could change without necessarily changing the price or quantity.
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| The motivation behind this kink is the idea that in an oligopolistic or monopolistically competitive market, firms will not raise their prices because even a small price increase will lose many customers. This is because competitors will generally ignore price increases, with the hope of gaining a larger market share as a result of now having comparatively lower prices. However, even a large price decrease will gain only a few customers because such an action will begin a [[price war]] with other firms. The curve is therefore more [[Elasticity (economics)|price-elastic]] for price increases and less so for price decreases. Firms will often enter the industry in the long run.
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| ==See also==
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| * [[Big Business]]
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| * [[Monopsony]]
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| * [[Oligopolistic reaction]]
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| * [[Oligopsony]]
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| * [[Perfect competition]]
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| * [[Prisoner's Dilemma]]
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| * [[Simulations and games in economics education]]
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| * [[Swing producer]]
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| * [[conjectural variation]]
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| ==Notes==
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| {{Reflist|group=note}}
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| ==References==
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| {{Reflist|3}}
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| ==External links==
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| * [http://www.egwald.ca/economics/index.php Microeconomics] by Elmer G. Wiens: Online Interactive Models of Oligopoly, Differentiated Oligopoly, and Monopolistic Competition
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| * Vives, X. (1999). Oligopoly pricing, MIT Press, Cambridge MA. (A comprehensive work on oligopoly theory)
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| * [http://www.oligopolywatch.com Oligopoly Watch] A blog on current oligopoly issues from a business and social perspective
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| * [http://www.economicsnetwork.ac.uk/teaching/simulations/managerialbusinesseconomics.htm Simulations in Managerial/Business Economics]
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| * [http://www.economicsnetwork.ac.uk/teaching/simulations/principlesofmicroeconomics.htm Simulations in Principles of Economics]
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| * [http://huwdixon.org/SurfingEconomics/chapter6.pdf Oligoply Theory made Simple], Chapter 6 of [http://huwdixon.org/SurfingEconomics/index.html Surfing Economics] by [[Huw Dixon]].
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| {{microeconomics}}
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| {{Aspects of capitalism}}
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| [[Category:Market structure and pricing]]
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| [[Category:Economic problems]]
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| [[Category:Oligopoly| ]]
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