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3.4.4 Oligopoly, image, image, image, image, image, image, image, image,…
3.4.4 Oligopoly
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NON-PRICE COMPETITION
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LOYALTY CARDS- This gives consumers rewards that could increase consumption and can increase information
PRODUCTIVE DEVELOPMENT- a firm that has higher product development may crate a more appealing product.
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CONDITIONS FOR COLLUSION
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EXAMPLE OF COLLUSION
2002/2003 asda colluded with dairy producer Wiseman dairies to increase the price of dairy products in supermarkets.
OFT did investigation and fined them 116m
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WHAT IS IT?
An oligopoly is when there are few firms who have a large share of the market and they are interdependent.
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KINKED DEMAND THEORY
As firms are interdependent the demand curve has an elastic section above p1 and an inelastic section below p1.
A price increase will cause a high decrease in quantity
A price decrease will cause a small increase in quantity.
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EVALUATION TO KINKED DEMAND CURVE.
-In the real world prices change
-Firms may not want to maximise profits so may reduce prices even with inelastic demand.
-Some firms may have inelastic demand.
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