Unless a monopoly is allowed to exist due to a government license or protection from a strong patent, markets have at least a few sellers. When a market has multiple sellers, at least some of which pr...Unless a monopoly is allowed to exist due to a government license or protection from a strong patent, markets have at least a few sellers. When a market has multiple sellers, at least some of which provide a significant portion of sales and recognize (like the monopolist) that their decisions on output volume will have an effect on market price, the arrangement is called an oligopoly.
Collusion occurs when oligopoly firms make joint decisions, and act as if they were a single firm. Collusion requires an agreement, either explicit or implicit, between cooperating firms to restrict o...Collusion occurs when oligopoly firms make joint decisions, and act as if they were a single firm. Collusion requires an agreement, either explicit or implicit, between cooperating firms to restrict output and achieve the monopoly price. This causes the firms to be interdependent, as the profit levels of each firm depend on the firm’s own decisions and the decisions of all other firms in the industry. This strategic interdependence is the foundation of game theory.
