Copyright © 2011 Cengage Learning
1717Oligopoly
Figure 1 The Four Types of Market Structure
• Tap water• Cable TV
Monopoly(Chapter 15)
• Novels• Restaurants
Monopolisticcompetition(Chapter 16)
• Chocolate bars• Crude oil
Oligopoly(Chapter 17)
Number of firms?
Perfect
• Wheat• Milk
competition(Chapter 14)
Type of products?
Identicalproducts
Differentiatedproducts
Onefirm
Fewfirms
Manyfirms
Copyright © 2011 Cengage Learning
Table 1 The Demand Schedule for Water
Copyright © 2011 Cengage Learning
Figure 2 The Prisoners’ Dilemma
Mr Black’ s decision
Confess
Confess
Mr Black gets 8 years
Mr Pink gets 8 years
Mr Black gets 20 years
Mr Pink goes free
Mr Black goes free
Mr Pink gets 20 years
gets 1 yearMr Black
Mr Pink gets 1 year
Remain silent
RemainSilent
Mr Pink’sdecision
Copyright © 2011 Cengage Learning
Figure 3 An Oligopoly Game
Saudi Arabia’s decision
High Production
High production
Saudi Arabia gets $40 billion
Iran gets $40 billion Iran gets $60 billion
Iran gets $30 billion Iran gets $50 billion
Low production
Lowproduction
Iran’sdecision Saudi Arabia gets
$50 billion
Saudi Arabia gets $30 billion
Saudi Arabia gets $60 billion
Copyright © 2011 Cengage Learning
Figure 4 An Arms Race Game
Decision of Iran
Arm
Arm
Iran at risk
Israel at risk
Iran at risk and weak
Israel safe and powerful
Iran safe and powerful
Israel at risk and weak
Iran safe
Israel safe
Disarm
Disarm
Decision
of
Israel
Copyright © 2011 Cengage Learning
Figure 5 An Advertising Game
Marlboro’ s decision
Advertise
Advertise
Marlboro gets $3billion profit
Camel gets $3billion profit
Camel gets $5billion profit
Marlboro gets $2billion profit
Camel gets $2billion profit
Marlboro gets $5billion profit
Camel gets $4billion profit
Marlboro gets $4billion profit
Don’t advertise
Don’tAdvertise
Camel’sdecision
Copyright © 2011 Cengage Learning
Figure 6 A Common Resources Game
Shell’s decision
Drill twowells
Drill two wells
Shell gets €4million profit
BP gets €4million profit
BP gets €6million profit
Shell gets €3million profit
BP gets €3million profit
Shell gets €6million profit
BP gets €5million profit
Shell gets €5million profit
Drill one well
Drill onewell
BP’sdecision
Copyright © 2011 Cengage Learning
Figure 7 Jack and Jill’s Oligopoly Game
Jack’s decision
Sell 40litres
Sell 40 litres
Jack gets€1600 profit
Jill gets€1600 profit
Jill gets€2,000 profit
Jack gets€1500 profit
Jill gets€1500 profit
Jack gets€2000 profit
Jill gets€1800 profit
Jack gets€1800 profit
Sell 30 litres
Sell 30litres
Jill’sdecision
Copyright © 2011 Cengage Learning
Recommended
