chapter  7
Oligopoly Pricing
Pages 32

Chapter 5 looked at different aspects of market structure, and its importance. This showed that market structure is an important determinant of conduct and performance, but that it is necessary to realise both that structure does not rigidly determine performance, and also that structure is not exogenous but can be affected by firms’ behaviour. Chapter 6 examined the market structure which is closest to the textbook case of simple monopoly-i.e. dominance. In this chapter we move on to consider industries which can be described as oligopolistic and focus attention on pricing behaviour in these industries. An oligopolistic industry contains a small number of firms, which means that the effect of any action taken by one of the firms will depend on how its rivals react. For instance, a price cut by one firm will result in a larger increase in sales if the other firms in the industry maintain their existing price than if they all follow its example.