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Types of market structures: perfect competition, monopolistic competition, oligopoly and monopoly. Oligopoly in the economy - what is it? The role of oligopolies in the modern Russian economy The concept and definition of oligopoly

oligopoly(from other Greek ?????? - small and ????? - trade) is a special type of market structure, which is characterized by imperfect competition. In an oligopoly, there are very few firms in an industry. In modern economies, examples of oligopolies include airliner manufacturers such as Airbus and Boeing, computer and technology manufacturers Apple and Microsoft, and some car manufacturers such as BMW and Mercedes. There is a special term for an oligopoly with just two members: a duopoly.

In an oligopoly, there are a small number of sellers in the market who are susceptible to marketing strategies and pricing principles. The small number of sellers is the result of the difficulty of entering the market for new entrants. Sellers carefully monitor the actions and strategies of competitors. For example, if one of the aluminum producers lowers prices by a few percent, buyers will prefer it to other suppliers. Other aluminum producers will need to respond to price cuts in a similar way or by expanding their range of services.

The market economy is a complex and dynamic system, with many connections between sellers, buyers and other participants in business relations. Therefore, markets, by definition, cannot be homogeneous. They differ in a number of parameters: the number and size of firms operating in the market, the degree of their influence on the price, the type of goods offered, and much more. These characteristics define types market structures or otherwise market models. Today it is customary to distinguish four main types of market structures: pure or perfect competition, monopolistic competition, oligopoly and pure (absolute) monopoly. Let's consider them in more detail.

The concept and types of market structures

Market Structure- a combination of characteristic industry features of the organization of the market. Each type of market structure has a number of characteristics that are characteristic of it, which affect how the price level is formed, how sellers interact in the market, and so on. In addition, types of market structures have varying degrees of competition.

Key characteristics of types of market structures:

the number of sellers in the industry;
firm sizes;
number of buyers in the industry;
type of goods;
barriers to entry into the industry;
availability of market information (price level, demand);
the ability of an individual firm to influence the market price.

The most important characteristic of the type of market structure is level of competition, that is, the ability of a single seller to influence the general market situation. The more competitive the market, the lower this possibility. Competition itself can be both price (change in price) and non-price (change in the quality of goods, design, service, advertising).

Can be distinguished 4 main types of market structures or market models, which are presented below in descending order of the level of competition:

perfect (pure) competition;
monopolistic competition;
oligopoly;
pure (absolute) monopoly.

table with comparative analysis The main types of market structure is shown below.

Table of the main types of market structures

Perfect (pure, free) competition

perfect competition market (English "perfect competition") - characterized by the presence of many sellers offering a homogeneous product, with free pricing.

That is, there are many firms on the market offering homogeneous products, and each selling firm, by itself, cannot influence the market price of this product.

In practice, and even on the scale of the entire national economy, perfect competition is extremely rare. In the 19th century it was typical for developed countries, but in our time, only agricultural markets, stock exchanges or the international currency market (Forex) can be attributed to markets of perfect competition (and even then with a reservation). In such markets, a fairly homogeneous product (currency, stocks, bonds, grain) is sold and bought, and there are a lot of sellers.

Features or conditions of perfect competition:

number of sellers in the industry: large;
size of firms-sellers: small;
goods: homogeneous, standard;
price control: none;
barriers to entry into the industry: practically absent;
competitive methods: only non-price competition.

Monopolistic competition

Monopolistic competition market (English "monopolistic competition") - characterized by a large number of sellers offering a diverse (differentiated) product.

In conditions of monopolistic competition, entry to the market is fairly free, there are barriers, but they are relatively easy to overcome. For example, in order to enter the market, a firm may need to obtain a special license, patent, etc. The control of firms-sellers over firms is limited. The demand for goods is highly elastic.

An example of monopolistic competition is the cosmetics market. For example, if consumers prefer Avon cosmetics, they are willing to pay more for it than for similar cosmetics from other companies. But if the price difference is too big, consumers will still switch to cheaper counterparts, such as Oriflame.

Monopolistic competition includes the food and light industry markets, the market for medicines, clothing, footwear, and perfumery. Goods in such markets are differentiated - the same product (for example, a multicooker) different sellers(manufacturers) can have many differences. Differences can manifest themselves not only in quality (reliability, design, number of functions, etc.), but also in service: the availability of warranty repairs, free shipping, technical support, payment by installments.

Features or features of monopolistic competition:

number of sellers in the industry: large;
size of firms: small or medium;
number of buyers: large;
product: differentiated;
price control: limited;
access to market information: free;
barriers to entry into the industry: low;
competitive methods: mainly non-price competition, and limited price.

Oligopoly

oligopoly market (English "oligopoly") - characterized by the presence on the market of a small number of large sellers, whose goods can be both homogeneous and differentiated.

Entry into the oligopolistic market is difficult, entry barriers are very high. The control of individual companies over prices is limited. Examples of an oligopoly include the automotive market, the mobile phone market, household appliances, metals.

The peculiarity of an oligopoly is that the decisions of companies about the prices of a product and the volume of its supply are interdependent. The situation on the market strongly depends on how companies react when the price of products is changed by one of the market participants. Possible two kinds of reactions: 1) follow reaction- other oligopolists agree with the new price and set prices for their goods at the same level (follow the initiator of the price change); 2) reaction of ignoring- other oligopolists ignore price changes by the initiating firm and maintain the same price level for their products. Thus, an oligopoly market is characterized by a broken demand curve.

Features or oligopoly conditions:

number of sellers in the industry: small;
size of firms: large;
number of buyers: large;
goods: homogeneous or differentiated;
price control: significant;
access to market information: difficult;
barriers to entry into the industry: high;
competitive methods: non-price competition, very limited price competition.

Pure (absolute) monopoly

Pure monopoly market (English "monopoly") - characterized by the presence on the market of a single seller of a unique (having no close substitutes) product.

Absolute or pure monopoly is the exact opposite of perfect competition. A monopoly is a one-seller market. There is no competition. The monopolist has full market power: sets and controls prices, decides how much to offer the market. In a monopoly, the industry is essentially represented by just one firm. Barriers to market entry (both artificial and natural) are virtually insurmountable.

The legislation of many countries (including Russia) fights against monopolistic activity and unfair competition (collusion between firms in setting prices).

Pure monopoly, especially on a national scale, is a very, very rare phenomenon. Examples are small settlements (villages, towns, small towns), where there is only one shop, one owner of public transport, one Railway, one airport. Or a natural monopoly.

Special varieties or types of monopoly:

natural monopoly- a product in an industry can be produced by one firm at a lower cost than if many firms were engaged in its production (example: public utilities);
monopsony- there is only one buyer in the market (monopoly on the demand side);
bilateral monopoly- one seller, one buyer;
duopoly– there are two independent sellers in the industry (such a market model was first proposed by A.O. Kurno).

Features or monopoly conditions:

number of sellers in the industry: one (or two, if we are talking about duopoly);
company size: various (usually large);
the number of buyers: different (there can be both a multitude and a single buyer in the case of a bilateral monopoly);
product: unique (has no substitutes);
price control: full;
access to market information: blocked;
barriers to entry into the industry: virtually insurmountable;
competitive methods: absent as unnecessary (the only thing is that the company can work on quality to maintain the image).

Galyautdinov R.R.

⚡ Oligopoly ⚡- a form of the market when there are several enterprises producing similar products. Another definition of an oligopolistic market would be a Herfindahl index value greater than 2000. An oligopoly of two participants is called a duopoly.

Examples of oligopolies include manufacturers of passenger aircraft, such as Boeing or Airbus, car manufacturers, such as Mercedes, BMW. In the Republic of Belarus there are 4 sugar factories, 3 factories producing chemical fiber.

Types of oligopolies

Homogeneous(non-differentiated) - when several enterprises producing homogeneous (non-differentiated) products operate on the market.

Homogeneous products - products that do not differ in a variety of types, grades, sizes, grades (alcohol - 3 grades, sugar - about 8 grades, aluminum - about 9 grades).

Heterogeneous(differentiated) - several enterprises produce non-homogeneous (differentiated) products.

Heterogeneous products - products that are characterized by a wide variety of types, varieties, sizes, brands.
Example - cars, cigarettes, soft drinks, steel (about 140 marks).

Oligopoly of dominance- a large firm operates in the market, specific gravity which in the total volume of production is 60% or more and therefore it dominates the market. Several small firms work alongside it and divide the remaining market among themselves.

Example: in the Republic of Belarus, the ceramic tile market is dominated by OJSC "Kiramin", producing more than 75% of these products.

Duopoly- when only 2 manufacturers or sellers of this product work on the market.

Example: in the Republic of Belarus there are two factories producing televisions - Vityaz and Horizon, they act in everything imitating each other.

Characteristic features of the functioning of oligopolies

Both differentiated and non-differentiated products are produced.
Decisions of oligopolists regarding production volumes and prices are interdependent, i.e. oligopolies imitate each other in everything. So if one oligopolist lowers prices, then others will definitely follow his example. But if one oligopolist raises prices, then others may not follow his example, because. risk losing their market share.
In the conditions of an oligopoly, there are very rigid barriers to entry into this industry of other competitors, but these barriers are surmountable.

". Another definition of an oligopolistic market would be a Herfindahl index greater than 2000. An oligopoly with two participants is called a duopoly.

Main features

When there are a small number of firms in the market, they are called oligopolies. In some cases, the largest firms in an industry can be called oligopolies. The products supplied by the oligopoly to the market are identical to the products of competitors (for example, mobile connection), or has a differentiation (for example, washing powders). At the same time, price competition is very rare in oligopolistic markets. Firms see profit opportunities in the development of non-price competition. As a rule, it is very difficult for new firms to enter the oligopolistic market. Barriers are either legal restrictions or the need for large initial capital. Therefore, big business is an example of an oligopoly.

Of particular importance to the functioning of oligopolies is their awareness of the market. Given the ability of competitors to expand production, each firm is afraid of rash actions that reduce its market share. Therefore, awareness is one of the prerequisites for existence. The behavior of each firm in the market has a clearly justified logic of actions and therefore is called strategic. Over time, strategies can be adjusted, but such changes are of a medium or long-term nature.

Typology of oligopoly models

The behavioral strategies of oligopolies are divided into 2 groups. The first group provides for the coordination of actions by firms with competitors (cooperative strategy), the second - the lack of coordination (non-cooperative strategy).

cartel model

The best strategy for an oligopoly is to collude with competitors over production prices and output volumes. Collusion makes it possible to increase the power of each of the firms and to use opportunities for obtaining economic profits in the amount that a monopoly would receive if the market were monopoly. Such collusion in economics is called a cartel.

In the antitrust laws of most countries, collusion is prohibited, therefore, in practice, cartels are either international (OPEC cartel) or secret.

A feature of the existence of cartels is their fragility: cartel members are always tempted to get a higher income in the short term by violating the agreement, and when this happens, the cartel falls apart.

Price (Volume) Leadership Model

As a rule, among the set of firms, one stands out, which becomes the leader in the market. This is due, for example, to the duration of existence (authority), the presence of more professional staff, the presence of scientific units and the latest technologies, a higher share of them in the market. The leader is the first to make changes in price or output. At the same time, the rest of the firms repeat the actions of the leader. As a result, there is consistency common action. The leader should be the most informed about the dynamics of demand for products in the industry, as well as about the capabilities of competitors.

Cournot model

The behavior of firms is based on comparing independent forecasts of market changes. Each firm calculates the actions of competitors and chooses a volume of production and a price that stabilizes its position in the market. If the initial calculations are wrong, the firm corrects the selected parameters. After a certain period of time, the shares of each firm in the market stabilize and do not change in the future.

Bertrand model (price war model)

It is assumed that each firm wants to become even larger and ideally capture the entire market. To force competitors to leave, one of the firms begins to reduce the price. Other firms, in order not to lose their shares, are forced to do the same. The price war continues until only one firm remains in the market. The rest are closed.

Universal Interdependence

Since there are few firms in the market, sellers need to develop growth strategies for their firm so that they are not forced out of the market by competitors. Since there are few firms in the market, companies closely monitor the actions of competitors, including their pricing policy who they work with, etc.

Price policy

The pricing policy of an oligopolistic company plays a huge role in her life. As a rule, it is not profitable for a firm to increase the prices of its goods and services, since it is likely that other firms will not follow the first one, and consumers will "pass" to a rival company. If the company lowers prices for its products, then in order not to lose customers, competitors usually follow the company that lowered prices, also reducing prices for the goods they offer: there is a “race for the leader”. Thus, so-called price wars often occur between oligopolists, in which firms set a price for their products that is no higher than that of a leading competitor. Price wars are often detrimental to companies, especially those that compete with more powerful and larger firms.

The problem of price stability in an oligopoly

A feature of the oligopoly is their high excess capacity, which allows, if necessary, to significantly increase the volume of production. Therefore, before changing prices and tariffs, each firm should analyze possible actions competitors. In oligopolistic markets, most often, there is price stability. It can be explained using the broken demand curve model. Suppose the original price is P1, the quantity is Q1. If the firm decides to lower the price and increase demand for the product, then the competing firm will do the same in order not to lose its market share. Therefore, the increase in demand will be small, and the demand itself will be characterized by low elasticity. If the firm begins to increase the price, then competitors will not change their price, thereby hoping to get additional buyers. As a result, when the price increases, the firm will face a large reduction in demand. This suggests that it will be elastic. Combining 2 demand graphs, we get its single dynamics (broken graph curve demand).

In order to determine the behavior of the firm with such demand, it is necessary to compare the MR and MC of the firm. A single MR chart will consist of 2 parts with a vertical gap between them. The presence of this gap allows us to conclude that an increase in costs from MC1 to MC2 will not lead to a change in production volume and price. Thus, an oligopoly is a structure that very rarely changes the price of its products and the volume of its production. The change occurs only in the case of significant shocks: a sharp increase in resource prices, a significant increase in taxes.

Cooperation with other companies

Some oligopolists act according to the principle "don't have a hundred rubles, but have a hundred friends." Thus, firms enter into partnerships with competitors such as alliances, mergers, conspiracies, cartels. For example, the air transportation oligopolist, Aeroflot, in 2006, entered into the Sky Team alliance with other world airlines, the oil-producing countries united in OPEC, often recognized as a cartel. An example of a merger between two companies is the merger of Air France and KLM. By uniting, firms become more powerful in the market, which allows them to increase output, change the price of their goods more freely and maximize their profits.

Using Game Theory

Game theory is a theory of the behavior of subjects under conditions when the decisions of one of them affect the decisions of all the others. It is used to analyze the actions of both individuals and firms.

The models of oligopoly developed in the economic literature do not always take into account the circumstances of the formation of oligopolistic markets and the impact of various changes on them. A universal tool for describing the behavior of an oligopoly is game theory. Its essence is to identify options for action, the possible consequences of a sequence of actions, and then conduct an analysis to find the best option for each of the parties. The process of such analysis is called a game.

The main drawback of game theory is the great dependence of the result obtained on the model of subjects' awareness, whose real awareness may remain unknown.

Oligopoly and efficiency

Oligopoly has advantages and disadvantages that affect efficiency. The positive features include:

Active funding for R&D.
Intense non-price competition leads to increased differentiation in the market.
Unlike monopolistic competitors, an oligopoly pursues many more directions.

The negative features include:

Using the possibility of collusion, the oligopoly can behave like a pure monopolist.
Oligopolies may not achieve economies of scale because they are smaller than monopolies.
Oligopolies are forced to engage in non-price competition, which increases costs.
Oligopolies are less subject to regulation due to constant interaction with other firms.
Sometimes firms do not strive to reach their full potential, compensating for higher costs with higher prices (x-inefficiency).

Market power: its sources and indicators

market power- the possibility of establishing and regulating prices in the market. Sources of market power:

Demand-side sources: market demand elasticity; the availability of substitute goods and the magnitude of the cross elasticity of demand for them; growth rates and temporary fluctuations in demand, etc.
Supply-side sources: technology features; legal barriers to competitors entering the industry; ownership of resources, barriers created by the firms themselves, etc.

Several indicators are used to determine market power:

Concentration Ratio: The percentage of sales of the top four or eight firms to total industry sales.
The Herfindahl-Hirschman coefficient is calculated as the sum of squares market shares of all firms in the industry and shows the degree of its concentration.
The Lerner coefficient is calculated as the ratio of the difference between the product price and the marginal cost of its production to the product price and shows the level of monopoly power of the firm.
Bain's coefficient.

The use of one or more coefficients allows us to conclude that the market is monopolized, but this does not give an exact answer to oligopoly or monopoly. Therefore, as a rule, they use additional information.

oligopoly market - this is a form of market organization in which several large firms operate on the market, producing a homogeneous or differentiating product, and independently setting the price for their products, taking into account the possible reaction of competitors. An oligopoly exists only when the number of firms is so small that each of them must take into account the reaction of competitors when formulating its pricing policy.

The oligopoly market is a typical form of modern market organization. An example of an oligopoly market with a homogeneous product is the market for potash fertilizers. The car market is a typical oligopoly market with a differentiated product.

The oligopoly market is characterized by the following traits :

1. there are several large firms;

2. the share of each firm in the market is significant;

3. each firm independently sets the price, taking into account the possible reaction of competitors;

4. there are obstacles to entry into the market of new firms (natural and artificial);

5. non-price competition prevails, which happens

subject (between the same goods with different quality characteristics: cars),

specific (between different products that satisfy the same need: juices, mineral water, etc.)

functional (between goods that satisfy different needs: food production and clothing production).

oligopoly market arises for the following reasons:

1. the effect of patents on scientific discoveries and inventions;

2. control over scarce resources;

3. the effect of economies of scale in production;

4. privileges from the state;

5. price and non-price competition, the use of non-economic methods of competition.

The oligopoly market is characterized by a wide variety of forms of organization. The economic literature describes various approaches to the classification of the oligopoly market. Exists oligopoly market classification on:

1) At. Fellner, which highlights:

The market is in the conditions of maximizing the profit of the industry;

Market in conditions of fundamental antagonism.

2) F. Mahlupu, which highlights:

The market is fully coordinated;

A market partly coordinated by:

a) a leading company

b) voluntary cooperation;

A market without coordination of actions, which can be represented as:

a) a price war

b) pursuing an aggressive trade policy;

c) chain oligopoly.

3)according to the degree of antagonism

Market at war;

The market is in a state of truce;

The market is at peace.

Thus, there are several possible situations in the market:

a) price wars between firms;

b) price stability in the conduct of non-price competition;

c) agreements on prices and volumes of production, official or implicit;

d) predictable behavior of firms.

7.6.2. Oligopoly market in the absence of collusion

If firms compete on price, then the oligopoly market is similar to the perfectly competitive market and is described by the corresponding models. This situation is quite rare, since large firms can compete on price for a long time due to their large financial capabilities, which can lead to large financial losses.

One of the first models of the oligopoly market is the model of the duopoly market, that is, the market in which two firms operate. It was proposed in the 40s of the nineteenth century. O. Kurno .he suggested , that there are two firms that are the same size. These firms experience constant economies of scale, that is, when the volume of production changes, the average cost, and therefore the price, does not change. Each firm decides on the volume of production independently, focusing on the free market share. As we already know, the firm achieves maximum sales revenue provided that the price elasticity of demand is equal to one. This state is achieved if the firm produces a volume of products that satisfies half the needs of the market. Therefore, if there is one firm on the market, then it will produce products in the amount of 50% of the market capacity, since in this case the maximum revenue is provided (Fig. 711.a). If the second firm enters this market, then it will focus on the market share not occupied by the first firm and will produce 50% of this share, i.e. 25% of the market volume (Fig.7.11.b).

a) one firm in the market b) the appearance of a second firm c) the reaction of the 1st firm d) the final equilibrium

Rice. 7.11 Cournot duopoly market

This situation cannot persist for a long time, since the first firm is not in an optimal position. She will decide to reduce the volume of production, focusing on the market share free from the second firm (75%), and the firm will set the volume of production corresponding to 50% of the free share, that is, 37.5% of the total market demand (Fig. 7.11.c) . The decrease in the production volume of the first firm creates conditions for the expansion of the production of the second firm. This adjustment process will continue until each firm produces 33.3% of the total market (Fig.7.11.d). Such a situation will characterize the establishment of a stable equilibrium in the market, as it guarantees each firm maximum revenue.

In the 30s of the twentieth century. German economist G. von Stackelberg considered a duopoly market in which one firm is larger than the other (asymmetric duopoly).

He came to the conclusion that equilibrium can be established, since in this case a large firm, being a leader, is trying to achieve a position of independence and independently sets the price, while another, smaller, firm, being an outsider, at the same time tries to reach a position of dependence, to adapt to terms of sale in that market. The smaller firm is actually a price-taking firm, acting in the same way as a firm with a perfect competitor. The adjustment process can be illustrated through reaction curves (Figure 7.12). In this case, the dominant firm chooses the most favorable point on the reaction curve, and the subordinate firm shows a Cournot-type reaction curve. G. von Shtakkelberg concluded that an asymmetric duopoly is an unstable form of market organization.

Figure 7.12 Stackelberg duopoly market

As already noted, the oligopoly market is characterized by the absence of price competition and the stability of the price level. This situation is reflected in broken demand curve models (Fig.7.13).

Figure 7.13 Broken demand curve model

According to this model, if an equilibrium price has formed in the oligopoly market, then firms are not interested in changing this price, since in any case they incur losses in the long run.

If one firm decides to increase the price, other firms are likely to leave the price unchanged. As a result, the firm that raised the price will lose a large number of buyers, since demand will be elastic, and, consequently, the firm will reduce revenue and profit. If a firm lowers the price of its product, then other firms are likely to lower the price as well. As a result of this, the expansion of sales volume will be insignificant (demand will be price inelastic), does not compensate for the losses associated with a price decrease, and, consequently, the company's revenue and profit will decrease. Thus, any deviation of the price from the equilibrium leads to a reduction in the firm's revenue and profit.

This theory also explains why firms in an oligopoly market keep prices the same even if production costs change.

In the 60s. American economists Efroimson and P. Sweezy developed a kinked demand curve model that explains the upward trend in the price level during a period of economic growth (Figure 7.14).

Fig. 7.14 Model of a broken demand curve in the context of economic growth

During the period of economic growth, the volume of production and incomes of the population increase. Therefore, the company raises the price, hoping that the growth in incomes of the population will allow selling products at higher prices. The decrease in sales will be small (inelastic demand) because buyers' incomes have increased and they can afford to buy the product at a higher price. Due to this, the company will increase the revenue from the sale of products. If a firm lowers the price of its product, other firms are likely to leave the price unchanged, believing that with increased income there will always be buyers willing to pay the same price for the product offered. As a result, the firm that reduces the price will significantly expand the volume of sales of products and income. Comparing the two options, the company's management comes to the conclusion that it is more profitable to raise prices, since no additional efforts are required to expand production.

In the oligopoly market, there are a large number of different options for the behavior of firms, and this leads to the use of simulation mathematical models that allow you to describe the behavior of competitors in the market and choose the optimal course of action. In particular, it is used game theory - a section of applied mathematics, with the help of which the optimal strategy for the behavior of a subject in conflict situations is established, which is understood as a situation of a conflict of interests of two or more parties pursuing different goals. Each of the participants in the conflict can have some influence on the course of events, but does not have the ability to fully control it.

The mathematical model should describe:

Multiple stakeholders;

Possible actions of each party;

The interests of the parties, represented by payoff functions for each player.

In game theory, it is assumed that the payoff functions and the set of strategies available to each player are well known.

Games are classified based on one principle or another.

By way of interaction they can be cooperative if firms cooperate in making decisions, or non-cooperative if firms compete with each other.

By type of win games are zero-sum, where one player's gain is equal to the other's loss, and constant-difference, where all players win or lose at the same time.

The decision of the model provides managers with a decision matrix that reflects the payoffs for all possible strategies and situations. Based on the matrix, they must make a decision. The choice of solution depends on the nature of the manager. Allocate solutions for:

Criterion maximax (optimism), i.e. the manager focuses on the maximum gain;

Criterion maximin (pessimism), i.e. the manager seeks to choose a behavior strategy that minimizes losses;

Indifference criterion (focus on the maximum average result for the best strategy).

Most often, the pessimistic option is chosen, since it is assumed that the opponent is a qualified specialist who chooses the best solutions.

Suppose we have two firms ( BUT and AT) having the same volume of sales in the market and two strategies of the firm's behavior are possible BUT: raise the price of products or leave the price unchanged (Table 7.1).

Since a competitor will take retaliatory action, one of four situations can occur in the market:

1) firm BUT raises the price, firm AT leaves the price unchanged;

2) firm BUT AT raises the price;

3) firm BUT raises the price, firm AT raises the price;

4) firm BUT leaves the price unchanged AT leaves the price unchanged.

Assume that the loss in case of a price increase by the firm BUT in our case will amount to 10,000 cu, since part of the buyers will start buying goods from the company AT which does not raise the price. If the firm AT will also increase the price, then the losses of each firm will amount to 5000 USD. The economic outcomes of each situation for firms are presented in tabular form.

Table 7.1

Decision Matrix

				Firm B's minimum loss for each strategy
		The price is rising	Price does not change	Firm B's minimum loss for each strategy
		Firm A incurs a loss of $5,000. Firm B incurs a loss of $5,000.	A bears losses in the amount of 10,000 USD. B makes a profit of $10,000.
	Price does not change	Firm A makes a profit of $10,000. Firm B incurs a loss of $10,000.	Firm A's earnings do not change. Firm B's earnings do not change.
Firm A's minimum loss for each strategy

Firm decision BUT will depend on the chosen strategy. One such strategy is the loss minimization strategy. In this case, the company's management evaluates the possible losses for each strategy and chooses the strategy that brings the least losses. In our case, the management BUT will raise the price, assuming that the firm AT will also raise the price.

If the firms coordinated their actions (cooperative game), then the prices in the market would remain unchanged. Studies have shown that if the payoffs of the players are asymmetric, then there are inevitably elements of cooperation in the choice of strategies.

The oligopoly market, as we have already noted, is characterized by a wide variety of behaviors that, ultimately, are oriented towards maximizing profits. In modern economic literature, works appear that state that large firms set as the goal of their behavior not to maximize profits, but to achieve other results: increasing sales, maintaining market share, conquering new markets, and so on. All this complicates the analysis of the oligopoly market and expands the scope of application of simulation modeling in the practice of making managerial decisions.