Chapter 16 or 17 (Oligopolies Review)

This chapter was relatively easy to understand. It dove into oligopolies, which is a form of imperfect competition. We briefly touched upon this the previous chapter so I kind of knew what was going on for the most part. The first 10 pages were very easy to understand, and the examples and charts the book gave helped me understand a bit more. I would give this chapter a 1.5/3


The definition of imperfect competition is that it has competitors but not so much that they are price takers. The book described two types of imperfect competition: oligopolies and monopolistic competition. A monopolistic competition is a market structure in which many firms sell products that are similar but not identical. This was what we learned in the previous chapter.  

Just like the book explained in the previous chapter we learned, there are within the four types of market structures, which are monopolies, oligopolies, monopolistic competition, and perfect competition. The type of market structure talked about in this chapter was oligopolies. An oligopoly is a market structure in which only a few sellers offer similar or identical products. 

Something interesting I found in the book is that economists measure a market’s domination using the concentration ratio, which is the percentage of total output in the market supplied by the four largest firms. Oligopolies tend to have high concentration ratios, which suits the definition of an oligopoly. The book begins to explain oligopolies by using the example of Jack and Jill and the control over water, a duopoly.

Also, the book has a nice way of achieving equilibrium for oligopolies, which is the Nash equilibrium. It explains further by explaining that the Nash equilibrium is a situation in which economic participants interacting with one another each chooses their best strategy given the strategies that all the others have chosen. 

Later in the book, they talked about game theory, which is the study of how people behave in strategic situations. An example of this game is the prisoners’ dilemma, which is a game between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial.