Chapter 17

Chapter 17 goes over oligopolies. An oligopoly is when there are only a few sellers for an entire market. Because of this oligopolies can have a huge affect on other seller's profits in the market depending on how much they produce. The simplest form of an oligopoly is a duopoly. In an  which contains two firms. Oligopolies can reach maximum profit if they cooperate with the other firms. This is called collusion and firms that do this are part of a cartel. However there are laws in place to stop most colluding. Since many firms cannot cooperate they compete to best each other, but this end up bringing the firms to a Nash Equilibrium where the firms will not increase production anymore because they will lose profits. If the firms cooperated they would've been able to gain much more profit. With this competition of firms game theory is introduced and the example of the prisoner dilemma is discussed.