A fundamental characteristic of oligopolies is the tendency for them to follow p

Question

A fundamental characteristic of oligopolies is the tendency for them to follow price leadership and to act in harmony in the setting of prices, while monopolistic competitors will find it possible to earn only normal profits in the long run—this is because entry into the field by rivals is relatively easy. In this discussion, answer the following:
What examples of these characteristics are you aware of?
Are you aware of any real-world situations where these principles are violated?
How can you explain the behaviors at variance to established economic theory?

Explanation / Answer

While oligopolist can collude and set prices to earn monopoly profits, monopolistic firms cannot. Monopolistic firms can only earn normal profits such as the case in perfect competition simply because although their prices are different, they are only slightly different and there are mny close substitutes. In this case, if the price for one good is too high, the buyer can simply switch to another good that exhibits the same utitlity level. Think about ram memeory for computers. The products are different brand names however are not different from one another. In this case, there are many substitutes and sellers must charge similar prices where MC=MR. If they try to collude this will violate governmnet and federal laws. Hope this helps

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