Interdependence, rigid prices,nonprice competition,mergers and collusion are characterists of oligopolies...give in details of what customers can get and lose from 5 behaviors above.

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Interdependence leads to the other things that you list, so consumers do not gain or lose directly from it.

From rigid prices, consumers mostly lose.  Prices are not likely to go down because it would not do the firm much good (the other firms would match the prices).  Of course, consumers are protected to some extent from price increases as well.

Mergers and collusion also hurt consumers.  Collusion allows the firms to act more or less as a monopoly because they have agreed on how they will or will not compete.

Nonprice competition is the good part of oligopoly.  The firms will compete on things like quality.  This can lead to greater innovation than in any other market structure.  That helps consumers by raising the quality of goods that are available to them.

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krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

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An oligopolistic competition refers to a type of imperfect competition in which the market is controlled by a few large firms, each of which is able to influence market supply and demand by its action. In such a market each firm anticipates actions of its competitors and factors the into their decision making. In this way there is strategic independence among oligopolistic competitors. This interdependence does not impact the customers directly. However, by influencing the competitive strategy of the suppliers, it has significant impact on value received by customers.

Because of this interdependence, the oligopolstic firms do not find it profitable to increase their price very much above those of their competitors. This adds an element of rigidity in the prices. This tends to benefit the customers by keeping prices at comparatively lower level a compared to monopolistic market price.

Because of the price rigidity as explained above, firms in oligopolistic market rely more on non=price competition. Non-price competition refers to any action taken by a firm to increase demand for its products by any action other than cutting its price. Non-price competition includes action such as better quality, better service, more attractive packaging, advertising. Non-price competition results in better quality  and service for the customer. It also gives the customer a wider choice of products within a product category.

While in short run competitors in an oligopolistic markets directly and explicitly compete with each others, trying to out do each other in capturing market share through price and non-price competition, in long term they may also cooperate or collude with each other - for example, competitors firms jointly deciding the prices to be charged. This kind of collusion generally results in higher prices and reduced benefits for the customers.

Merger is not necessarily limited to oligopolistic market, though it is more common in oligopolistic markets, whereby a company merges with or takes over a competitor company. Merger may be considered as an extreme form of cooperation or collusion, which tends to reduce the degree of competition in the market. In his way it tends to reduce the benefits derived by customers. However, mergers may also enable merged firms to reap symbiotic benefit that improves the efficiency, effectiveness, and capabilities of the merged entity beyond what is possible when each company is able to achieve independently. In such cases the merged entity may pass on to customers some of the gains of merger.

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