That the behavior of individual competitors matters is what makes oligopoly interesting. Few firms means few enough that a decision by a single firm can affect the entire industry.

   Consider some of our examples. If Toyota lowers prices or comes out with a new model it will affect sales of all the other major auto manufacturers. If Sony makes a major breakthrough in television technology sales of other TV brands will be affected.

   Understanding strategy is crucial for understanding Oligopoly. Our methods of predicting behavior based on the simple model of profit maximization will not be adequate. We require methods that enable us to model strategic thinking.

Copyright © 1995-2004, Inc. - All Rights Reserved