Microeconomic Policy
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Microeconomic Policy

A New Perspective

Clem Tisdell and Keith Hartley

This thoroughly accessible textbook shows students how microeconomic theory can be used and applied to major issues of public policy. In this way, it will improve their understanding of both microeconomic theory and policy and also develop their ability to critically assess them. Clem Tisdell and Keith Hartley have expanded upon their previous successful work on microeconomics. As a result, this new book is considerably updated with substantial chapter revisions, as well as new chapters dealing with business management, ownership, environmental issues, public choice, defence, conflict and terrorism.
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Chapter 9: Oligopoly and Policy-Making

Clem Tisdell and Keith Hartley


INTRODUCTION Oligopoly is a frequent market form in present-day industrial economies. It describes a market situation in which there are few sellers of a commodity or closely competitive commodities. Each seller usually holds a sizeable share of the market. Commodities in the hands of few sellers may be homogeneous or differentiated. A characteristic of oligopolistic markets is that sellers recognize that their individual decisions about marketing their commodities, such as changes in their prices or in their level of advertising effort, not only influence their own volume of sales but also significantly alter the sales of their competitors. Strong market interdependence exists between competitors. Consequently, competitors (rivals) may react by altering their marketing programme in response to an alteration in market strategies by an oligopolistic competitor. Thus, expected variations in the marketing behaviour of rivals need to be taken into account by an oligopolist contemplating a change in his/her market behaviour. The presence of oligopoly depends on the size of the market. At the international level, one can expect more competitors than at a national level, and more at a national level than at a regional level. A range of important products are oligopolized. Most high technology products, such as advanced computerized equipment and jet airliner production (on a worldwide scale), are controlled in their supply by oligopolists. Supplies of alumina and aluminium, refined copper, petroleum products, tractors, trucks, computer software in many cases, cigarettes, detergents, to give a few examples are oligopolized. Within national...

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