What is meant by collusive and non collusive oligopoly
in 5marks
Collusive oligopoly
-> It is also called Cooperative oligopoly.
->It is a form of the market in which there are a few firms and all decide to avoid competiton through a formal agreement.
->They collude to form a cartel.
-> Price and output of the member firms are fixed as a collective decision.
-> Sometimes a leading firm in the market is accepted by the cartel as a price leader.
-> Members of the cartel accept the price policy as specified by the price leader.
Non collusive oligopoly
->Is also called Non cooperative oligopoly
->Is a form of market in which there are a few firms and each firm pursues its own price and output policy independant of the rival firms.
->Each firm tries to increase its market share through competiton.
->Competiton is preferred to collusion as a means of profit maximisation.
-> Because there are only a few big firm in the market there is cut throat competition.
-> Brand loyalty is developed through aggressive advertisement.
-> It is also called Cooperative oligopoly.
->It is a form of the market in which there are a few firms and all decide to avoid competiton through a formal agreement.
->They collude to form a cartel.
-> Price and output of the member firms are fixed as a collective decision.
-> Sometimes a leading firm in the market is accepted by the cartel as a price leader.
-> Members of the cartel accept the price policy as specified by the price leader.
Non collusive oligopoly
->Is also called Non cooperative oligopoly
->Is a form of market in which there are a few firms and each firm pursues its own price and output policy independant of the rival firms.
->Each firm tries to increase its market share through competiton.
->Competiton is preferred to collusion as a means of profit maximisation.
-> Because there are only a few big firm in the market there is cut throat competition.
-> Brand loyalty is developed through aggressive advertisement.