Question

Why oligopolists’ decision-making is more complex than the decisions taken by the monopolists and perfectly competitive firms?

300 words

Answer 1

Unlike the monopolistic or a perfectly competitive market, the oligopoly market is characterized by the few dominant firms. The decision making process is highly cumbersome and burdensome in the oligopoly market structure.

The pricing decision in the perfectly competitive market is taken based on the market demand and supply forces.

The demand curve does not exist for the oligopoly firm in the market. The demand for the product of the firm depends on the price and output of the rival firms. Firm might lose its all buyers if rival firms reduce their prices.

Thus, all output and pricing decisions are taken based on the potential reaction from the rival firms. The right information is needed to take most prudent decision that can maximize the profit.

Such kinds of reaction are negligible or absent in the other forms of market.