Dynamic Mathematical Model of Oligopoly Competition Theoretical Principles

Abstract

In basic economics, two opposite market forms exist: Perfect competition and monopoly. In a perfectly competitive market each firm can sell as much as it wants to at the ruling market price. It believes that it cannot affect the price, as it is determined by the forces of demand and supply. A firm can sell as much as it wants to at this price. It is not bothered about what other firms in the market are doing. At the other extreme, monopoly is a situation where there is only one firm and it faces no close substitutes for its products. It also does not take into account what other firms are doing, as the firm and the industry are identical. But in actual life in most markets, firms have to take into account the actual and potential responses from rival firms. These firms are oligopolistic markets. An oligopoly is characterized by the presence of a few sellers in the market. The word few does not refer to any number or range of numbers. There are few firms in the Industry if they take explicitly into account the reactions from rival firms newline