Why demand curve of oligopoly is indeterminate in nature?
Dear Student,
Oligopoly is that form of market where there are few sellers and the price output policy of one seller do not affect the price and output policy of the other sellers. In an oligopoly, sellers produce homogeneous goods or the close substitutes but not perfect substitutes of one another. It is a market form of imperfect competition with a few firms operating on a big scale of a commodity.
In this market, each seller has a significant share of the market and hence there is high interdependence among sellers regarding the price and output policy.
Demand curve in an oligopoly cannot be defined due to the high degree of interdependence among firms. Interdependence means that the actions of one firm depend on the actions of other firms. A firm is considers the policies of the rival firms while determining its price and output level. For Example change by any one firm in any of its product will induce other firms yo make changes in their output. So change in price or in output by one firm, affects other firms operating in the market.
That's why the demand curve in oligopoly is no identified or undetermined.
Regards
Oligopoly is that form of market where there are few sellers and the price output policy of one seller do not affect the price and output policy of the other sellers. In an oligopoly, sellers produce homogeneous goods or the close substitutes but not perfect substitutes of one another. It is a market form of imperfect competition with a few firms operating on a big scale of a commodity.
In this market, each seller has a significant share of the market and hence there is high interdependence among sellers regarding the price and output policy.
Demand curve in an oligopoly cannot be defined due to the high degree of interdependence among firms. Interdependence means that the actions of one firm depend on the actions of other firms. A firm is considers the policies of the rival firms while determining its price and output level. For Example change by any one firm in any of its product will induce other firms yo make changes in their output. So change in price or in output by one firm, affects other firms operating in the market.
That's why the demand curve in oligopoly is no identified or undetermined.
Regards