Why is the oligopolist market structure particularly difficult to model? There a

Question

Why is the oligopolist market structure particularly difficult to model? There are so few firms, you can't get a statistically significant indicator of their behavior. The firms are so large that they appear to act randomly. That is, they don't respond in any systematic way to economic variables. The industry is characterized by mutual interdependence. Actually, the oligopolistic market structure is the easiest of the four to model. The Game Theory model of oligopoly concludes that the non-collusive oligopolist will: tend to charge a low price. Have NO incentive to collude with other firms in the industry. Tend to charge a high price. Nothing can be concluded from the game theory model of oligopoly. The first major effort to prevent the emergence of monopolies as the economy was industrializing and today remains as the cornerstone of anti-trust legislation is: The Sherman Act The Clayton Act The Federal Trade Commission Act Celler-Kefauver Act

Explanation / Answer

(1) option (C)

Mutual interdependence of decisions make statistical modeling difficult, since variables will be correlated.

(2) option (A)

A non-collusive oligopolist cannot understand other players' moves and so, charges a price that is lower than it would be under a collusive agreement.

(3) (A)

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