Chapter 17: oligopoly level of difficulty 2

There are four types of market structure, the monopoly, oligopoly which can be specified to be a duopoly, monopolistic competition and perfect competition. Markets with only a few sellers have an oligopoly where tensions exist between self interests and cooperation among other firms. Firms would be better off having cooperation and compromise with each other rather than being driven by their own self-interests. Although this is true, people/ firms would rather have their way  than getting the better deal. Duopolies exist from oligopolies where there are only two members. There may be an agreement on a monopoly outcome or they will become a cartel where the two firms will collide and create agreements amongst each other. Although cartels are possible, there are anti trust laws that determine the valid scenes for forming cartels. Nash equilibrium happens when economic actors chose their best strategy given the strategies that all others have chosen. When the firms individually decide to maximize the profit they make quantity of output greater than the level produced by a monopoly. Competitive price is less than the oligopoly price which is less than the monopoly price. The greater the number of sellers in an oligopolistic market the more it looks like a competitive market. Price may then approach the marginal cost and the quantity produced reaches the socially efficient level. Game theory on the other hand comes with strategic decisions that may lead to the prisoners' dilemma where compromise cannot be reached by firms and everyone is less efficient.