Managerial Economics

Oligopoly and Cartels

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.

At the extreme, sellers in an oligopoly could wield as much market power as a monopolist. This occurs in an oligopoly arrangement called a cartel, where the sellers coordinate their activities so well that they behave in effect like divisions of one enterprise, rather than as a competing business, that make independent decisions on quantity ...