compete hard, they may end up acting very much like perfect competitors, driving down costs and leading to

zero profits for all. If oligopolists collude with each other, they may effectively act like a monopoly and succeed

in pushing up prices and earning consistently high levels of profit. We typically characterize oligopolies by

mutual interdependence where various decisions such as output, price, and advertising depend on other

firm(s)' decisions. Analyzing the choices of oligopolistic firms about pricing and quantity produced involves

considering the pros and cons of competition versus collusion at a given point in time.

Why Do Oligopolies Exist?

A combination of the barriers to entry that create monopolies and the product differentiation that

characterizes monopolistic competition can create the setting for an oligopoly. For example, when a

government grants a patent for an invention to one firm, it may create a monopoly. When the government
{"total_pages": 597, "file_type": ".pdf", "creator": "PDFMiner", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "producer": "Prince 14.2 (www.princexml.com)", "file_name": "Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "batch_upload": true, "file_size_mb": 26.99}