Microeconomic

3a . Why do oligopolistic markets often exhibit price stability

Oligopolistic markets often exhibit price stability because the firms therein , after a period of competition amongst themselves , have learned that they will all earn more if they instead cooperate . Such cooperation is translated to price stability , as the price to be offered to the market is set at a level that will both enable the companies to reap healthy profits and at the same keep the market willing to buy their products and services at their prevailing prices (Lipsey Courant 1996 :245 ) Equilibrium

is , thus , achieved

Equilibrium brings balance to the economy - whether long- or short-lived . As a temporary phase that may or may not be maintained equilibrium occurs when there is no tendency for change in the decisions of the economic entities regarding their products and services , the price and volume that they will supply , and the demand segment that they will target (Lipsey Courant 1996 :246

Nash equilibrium is a specific scenario that portrays such balance . As opposed to how badly things may end up for the competing players , Nash equilibrium brings in profitable results for everybody . As opposed to getting stuck with the prisoner 's dilemma ' or the pride game companies in this scenario have individually opted to stick to the strategies that they believe will work and will hand them the market dominance that will secure their place as the industry leader (Osborne , An Introduction to Game Theory

Equilibrium , though , is not meant to last . One of...