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AP Economics

This module explores the complexities of oligopolies in economics, focusing on the factors that limit tacit collusion among firms. Key strategies such as product differentiation, price leadership, and non-price competition are highlighted as alternatives. Antitrust legislation has made collusion less common, but understanding oligopolistic behavior remains crucial for economic modeling. The presence of multiple competitors, the complexity of products, and varying strategic goals all influence market dynamics, making this a vital area of study in AP Economics.

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AP Economics

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  1. AP Economics Mr. Bernstein Module 66: Oligopoly in Practice December 13, 2013

  2. AP EconomicsMr. Bernstein Oligopolies in Practice • Antitrust legislation has made collusion uncommon • Several factors limit tacit collusion • Product Differentiation, Price Leadership and Non-price competition are more attractive strategies • The prevalence of Oligopolies makes understanding their decisions important, though difficult to model

  3. AP EconomicsMr. Bernstein Factors Limiting Tacit Collusion • Large number of firms in an industry • More competitors, more likely one “doesn’t get it” • Complex products and pricing schemes • Harder to keep up with whatever the tacit agreement is • Differences in interests • Firms may have differing strategic goals (geographic expansion, balance sheet issues, timeframes, personal goals of corporate leaders) • Bargaining power of buyers • Oligopolies often sell into distribution chain which is highly competitive market (ie breakfast cereal)

  4. AP EconomicsMr. Bernstein Alternative Strategies to Tacit Collusion • Product Differentiation • Price Leadership • Once in place, is a form of tacit collusion • Non-Price Competition • Price, Quality, Service… “choose any two”

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