macroeconomics

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Macro Economics

The above scenario illustrates the workings in an oligopolistic market which refers to a case where a small number of firms , usually less than ten , dominate a market and garner the greater majority of the sales revenue . Barriers to entry into these markets are quite high , and concerned firms deal with similar goods and /or services that serve as ready substitutes /alternatives . Individual firms are aware of the strategic decisions made by fellow oligopolies , and these (decisions mutually-influence each

player in this market . Such market is prone to tacit collusion , whereby there is a high level of monitoring of competing firms ' strategies , especially as regards price-setting , a phenomena referred to as `price leadership . In this situation , AMR Corps American Airlines emerged to set the general industrial price with the expectation that the other firms were to follow suit especially when American Airlines declared 99 one-way fares in many of the market niches of its competitors , including Northwestern turf , UAL Corps United Airlines , and even Delta Airlines and US Airways Group Inc

The concept of the Nash equilibrium also comes into play , whence it is assumed that each firm is well aware of the other firms ' equilibrium strategies , and no single firm has anything to gain by only changing their individual strategies , or rather , from acting unilaterally Evidence of the above is the action of Northwest Airlines to offer 198 round-trip fares , with connections , in retaliation to the strategy employed...