Economics-For Managers

The chapter discussed the different types of markets where imperfect competition prevails: monopoly, monopolistic competition, and oligopoly. Monopoly is a type of market structure where there is only one seller of the product in the market.

A monopolist applies price discrimination to increase his total revenue and profits. In monopolistic competition, there are a large number of buyers and sellers, the products are differentiated yet they are close substitutes. In an oligopoly market, firms produce either a homogeneous product or products that are close but not perfect substitutes. In this market there are few large players. Competing oligopolists may form cartels to maximize joint profits.

Oligopoly may be either collusive where firms come together to determine price and output or non-collusive where the pricing and other decisions are made independently. Game theory is a technique which helps in evaluating a situation when different individuals or organizations differ in their objectives.