Oligopoly Agreement

The existence of a monopoly means that there is only one company in a given sector, while a duopoly refers to a market structure with exactly two companies. In the meantime, an oligopoly includes two or more companies. Technically, there are not a maximum number of companies that can exist in an oligopoly, but in general, there must be so few powerful companies in a sector that anything a company does has a great influence on the decisions of other companies in that sector. In the three companies – monopoly, duopoly and oligopoly – other companies will see great barriers to entry. The problem with the application is to find solid evidence of collusion. Cartels are formal agreements. Because the cartels provide evidence of collusion, they are rare in the United States. Instead, most agreements are implicit, where companies implicitly realize that competition is bad for profits. Whether cartel members choose to defraud the cartel depends on the fact that the short-term revenues from the fraud outweigh the long-term losses resulting from the eventual bankruptcy of the cartel. It also depends in part on the difficulty for companies to monitor compliance with the agreement by other companies.

If surveillance is difficult, it is likely that a member will get away with fraud for longer; Members would then be more likely to cheat and the agreement would be more unstable. It is interesting to note that both the problem of maintaining an oligopoly and the coordination of actions between buyers and sellers in general on the market involve the disbursements of various detention dilemmas and coordination games that are repeated over time. As a result, many of the same institutional factors that facilitate the development of the market economy by reducing prisoner dilemmas among market participants, such as the safe application of contracts, high-confidence and reciprocity cultural conditions, and laissez-faire economic policy, could also help to promote and maintain oligopolies. In an oligopoly, companies work under imperfect competition. Given the strong price competitiveness generated by this sticky demand curve, firms are taking advantage of non-tariff competition to generate higher revenues and market share. The oligopoly is a form of common market in which a limited number of companies compete in terms of supply. The quantitative description of the oligopoly is often the concentration ratio of four feasts. This measure expresses as a percentage the market share held by the four largest companies in a given sector. For example, if, starting in the fourth quarter of 2008, we are bringing together the overall market shares of Verizon Wireless, AT-T, Sprint and T-Mobile, we see that together, these companies control 97% of the U.S. mobile market. [Citation required] Once this recognition has been made, these companies will have to conclude a joint cooperation agreement. Then they have to hide their pricing activities from the public.

There are a number of ways to do this; for example, they may reflect the actions of an agreed price leader and raise prices if the price leader does so. Oligopolies become ”ripe” when competing companies realize that they can maximize profits through joint efforts to maximize price control by minimizing the impact of competition.