Our primary technology for analyizing oligopoly behavior will be game theory. As we will see these are methods designed to focus on strategic considerations. Before we do that though let's look at a simple model which combines the profit maximization model we know well with some simple strategic considerations.

   Consider the two demand curves shown to the right. An oligopolist might not know which of these demand curves it faces. Suppose a firm knows that any time it raises or lowers its prices all other firms in the industry will do the same. In this case it faces DI, the inelastic curve. If all firms change prices together, the effect of a price change won't have a large effect on the sales of any one of the firms.

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