Briefly outline some of the main models of oligopoly in which firms compete according to output. Hence, discuss the contention that non-collusion is the inevitable outcome of oligopoly.

In an oligopoly, there are a number of firms which are all large enough to have an effect on price. Participants therefore analyse their competitors expected reaction to a change in output or price in order to make a profit maximizing decision. This is unlike for example, a competitive market, where results depend only on a firms own actions. Hence, a firm must know how their competitors will react to changes in price or quantity …

…ether or not they will be able create barriers to entry or if this is not possible they must work out whether or not new firms could bring the price down. These factors must be considered in great detail, before a decision is made to create a cartel. Many cartels have failed in the past due to problems from within and outside the cartel. Firms must learn from past experiences if it is to succeed.