oligopolmodeller

Oligopolmodeller, or oligopoly models, are a class of economic models that analyze strategic interactions among a small number of firms in a market. Because firms are interdependent, each firm’s best response depends on rivals’ anticipated actions. Oligopolmodeller are used to explain how prices, outputs, product variety, and welfare emerge when competition is neither perfectly competitive nor monopolistic.

The most influential strands are noncooperative models, where firms choose quantities (Cournot) or prices (Bertrand) under different timing and information assumptions. In Cournot models, firms select outputs simultaneously and a market price is determined by aggregate supply. In Bertrand models, firms set prices and, with homogeneous products, the lowest price captures demand, often pushing prices toward marginal cost. Stackelberg models introduce leadership and followers in a sequential game, producing different equilibria. Models with differentiated products, kinked-demand curves, or incomplete information broaden the range of outcomes and can allow tacit or explicit coordination in some settings.

Extensions include repeated and dynamic games, capacity constraints, and multi-market oligopoly, which help explain persistence of profits and strategic behavior beyond single-shot interactions. These refinements address issues such as commitment, entry, and strategic signaling.

Applications are common in industries with a few dominant firms, such as airlines, telecommunications, energy, and some manufacturing sectors. Oligopolmodeller inform competition policy and welfare analysis, but their results rely on simplifying assumptions about homogeneity, information, and entry barriers, which can limit external validity in real-world markets.