We know that in an oligopolistic competitive market,
- Inorder to create market power The firms will merge each
other.
- But there arises some externality with the adversary firm who
does not set for merge.
- Because of merger it decrease its rivals in the market as it
makes showcase power prompting positive externality.
- furthermore it makes a negative externality as it not creating
at the effective level (when P=MC).
- Implies it produces amount more noteworthy a monopolist yet
lesser than the flawlessly competitive market as it charges cost
more prominent than the impeccably competitive market yet lesser
than the monopolistic market.
- This is why oligopoly is treated as an external phenomenon
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