Difference between Collusive Oligopoly and Non-Collusive Oligopoly
Basis |
Collusive Oligopoly |
Non-Collusive Oligopoly |
---|---|---|
Cooperation |
In collusive oligopoly, companies secretly work together to control the market, often by making agreements to limit competition. |
In non-collusive oligopoly, companies compete independently without making official agreements to control the market. |
Competition |
Collusive oligopoly involves limited competition among firms, as they avoid competing directly with each other. |
Non-collusive oligopoly features intense competition among firms, as they strive to attract customers and gain market share. |
Pricing |
Prices in collusive oligopoly are often set collectively by the companies, resulting in higher prices for consumers. |
In non-collusive oligopoly, companies independently determine prices, potentially leading to lower prices for consumers due to competitive pressure. |
Output |
Firms in collusive oligopoly may agree to limit production to maintain high prices in the market. |
Each firm in non-collusive oligopoly decides its own production levels based on market conditions and individual strategies. |
Innovation |
In collusive oligopoly, there may be less incentive for innovation due to limited competition among firms. |
Non-collusive oligopoly fosters innovation as companies compete to differentiate themselves and attract customers. |
Legal Implications |
Collusive behavior in oligopoly is often illegal and can lead to legal consequences under antitrust laws. |
Non-collusive competition in oligopoly is generally legal, as long as companies don’t engage in unfair or anticompetitive practices. |
Difference between Collusive Oligopoly and Non-Collusive Oligopoly
An oligopoly is when a few companies control most of the market. There are two main kinds, collusive and non-collusive. In a collusive oligopoly, these companies work together to limit competition and make more money. But in a non-collusive oligopoly, they compete without any official agreements. This competition can mean lower prices and more choices for customers. Knowing about these types helps us understand how markets work and how they affect both customers and businesses.