Prices in OligopolyOligopoly is a market structure, which has some distinctive qualities that separate it from others. In particular, the oligopoly has barriers to entry and is composed of only a few companies, which supply the majority of the market and are interdependent. In other market structures the price of the product and other decisions are often based on technical information such as marginal cost or demand (when you are in a monopoly), but what makes the oligopoly unique compared to all other market structures is that companies cannot base their decisions solely on technical information. information they need to be aware of and react to their competitors. Oligopoly is also a distinctive market structure because price is not typically used as a competitive tool. There are exceptions to oligopolies that engage in price wars, for example AMD and Intel, semiconductor manufacturers, both use ferocious price gouging tactics because when one of them decreases the price of a product, the other has nothing else to to do than to follow to not do it. lose a large share of the market. The price wars between Intel and AMD are good for consumers but not for companies that every year miss their target revenues and make lower profits. Relatively stable prices in oligopoly, called sticky prices or rigid prices, are a strong feature of this market structure and this essay will try to explain why such prices exist. This essay will analyze situations in which companies do not coordinate their actions (Non-collusive behavior) and when they do, implicitly (tacit collusion) and explicitly (formal collusion).I. Non-collusive behavior Non-collusive behavior occurs when companies do not coordinate their actions but still react to competitors. In 1939 Robert Hall and Charles Hitch in the UK and Paul Sweezy in the US individually presented a bent demand curve, which demonstrates one reason why oligopolies fail to change prices. The graph of the bent demand curve (fig. 1) is hypothetical because companies will try to avoid changing their prices. If a company increases its price, represented in the graph by the demand curve AA, its competitors presumably will not follow and the first company will lose customers. If a company decides to lower its price, represented by BB, its competitors will have no choice but to lower their prices as well, which would not be beneficial to all companies in the market. A firm's demand curve is merged from the AA and BB demand curves and has a curve at point P, although it is not exactly clear where exactly the curve occurs.