Two oligopolistic firms forming a cartel will want to set a price so that the cartel produces a quantity that is more than the allocatively efficient amount.
Oligopolistic firms in economics refer to a small group of businesses that are aware of their interdependence in terms of their output and pricing strategies. A market with an oligopoly has a limited amount of companies that are aware of their interdependence in terms of price and production strategies.
Oligopoly differs from perfect competition in that each business must consider its interconnectedness, from monopolistic competition in that companies have some power over pricing, and from monopoly in that a monopolist has no competitors. The implications of mutual dependency among firms in pricing and production choices are often the focus of oligopoly study.
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