AQA Economics UNIT 3 - Oligopoly

Basic presentation for study notes on oligopoly - tailored to AQA spec. 

Please note that presentation may appear incomplete due to page references. These references always refer to diagrams you can find in copies of the AQA Economics A2/AS textbooks - I just couldn't be bothered to find the diagram for my own revision. 

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Key terms
Imperfect competition
· The range of market structures outside of perfect
competition
Oligopoly
· A market where there are a small number of dominant
firms
Duopoly
· A market where there are two dominant firms
Concentration ratio
· The market share of the biggest firms in the market…read more

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Price discrimination
· Means charging different prices to different customers
with the prices based on different willingness to pay
(elasticity of demand)
Cartel
· A collusive agreement by firms, usually to fix prices ­
sometimes output may also be fixed
Game theory
· A mathematical approach to the study of conflict and
decision making which treats conflict as games with set
tactics, strategies and rational players…read more

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Market structure defined by the number of
firms in the market
· Oligopoly = imperfect competition amongst
the few
· Oligopolistic firms are not monopolies, but do
have monopoly power…read more

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Types of oligopoly
· Competitive oligopoly
­ Oligopolies taking account of reactions of rivals when
forming market strategy, but does not collude/co operate
with them. Therefore uncertainty always exists
· Collusive oligopoly
­ To remove this uncertainty, the firm can form cartels or
price rings with other firms in the market to achieve better
outcomes e.g. Joint profit maximisation
­ This may result in a poorer outcome for the consumer with
high prices and restriction of choice therefore these
agreements are normally illegal as they are against the
public interest…read more

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Concentration ratios
· Concentration ratios are a good indicator of
oligopolistic market structures…read more

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