In an oligopoly, there are 2 different pricing strategies that might be followed:
In interdependence, oligopolies have to consider the actions of other firms. For example, if one firm reduces its price or increases its advertising, other firms in an oligopoly market would be forced to do the same thing in order to survive. This form of competition is also called survival of the fittest because it leads to economic efficiency and profits for all firms.
In this case, you can use game theory models that show how firms respond strategically to each other when they engage in a market where they are dependent on each other's decisions regarding price and quantity produced/sold.
Accordingly, interdependence theory assumes that all firms have similar costs so they cannot affect each other’s profit margins through changes in their own prices or quantities demanded (ceteris paribus).
In addition to this assumption about cost structures being identical across competitors’ products (homogeneous), another key assumption made by interdependence theory is perfect information across buyers as well as sellers such that no single buyer or seller has an advantage over others when making a purchase decision regarding product features offered by multiple sellers at varying prices per unit purchased by customers/consumers seeking such goods/services provided within this particular industry category defined by geographic location where individual memberships exist within this group known as “oligopolies” which form part of a larger system known as “markets”—specifically when competing against multiple rivals who may offer similar products but differ slightly from one another according to customer preferences based upon personal tastes
Yes, there can be competition in an oligopolistic market. Competition in an oligopolistic market is more intense than the competition in a monopolistic market and perfect competition market.
In an oligopoly, the firms are not so many to be able to divide the whole industry into different parts with each firm having its own part of the industry. But they are so many that their decisions will have a considerable effect on one another's profits and decisions.
So these firms have to take into account the reactions of others when making their own decisions about price, production, marketing strategy, etc., but still, they have some freedom to make independent decisions as well
Competition between these firms for particular customers or for particular raw materials or similar resources may lead to such fierce rivalry that one cannot exist without harming another's profits; this situation is called cutthroat competition.
Barriers to entry are the things that prevent new competitors from entering an industry. They can be natural, legal, or economic.
Natural barriers to entry include economies of scale and network effects. Economies of scale occur when larger companies can produce a product at lower costs per unit than smaller companies because they have more efficient technologies or can use their size to negotiate lower prices with suppliers. Network effects occur when a product becomes more valuable as more people use it; this makes it hard for new competitors to enter the market because consumers won't want to switch away from using their current service (e.g., Facebook).
Legal barriers include patents and copyrights which may protect one company's products from being copied by another company or allow one company exclusive rights over production or distribution in certain territories under certain circumstances; these restrictions make it difficult for new competitors who want to enter those markets since they would need access/licenses/permits from both governments.
If you're familiar with game theory, you'll know that it's a mathematical model of conflict and cooperation between intelligent rational decision-makers. Game theory can be applied to oligopoly market structure because it is a strategic game. Oligopolies are dynamic environments in which firms interact strategically with each other. This means that the behavior of one firm will affect the strategy of another firm and vice versa.
The reason why a price war cannot last forever is that the law of diminishing returns will eventually kick in. When there are only a few firms competing with each other, they can all cut their prices at the same time and still maintain their profit margins.
However, after some time has passed and all firms have cut prices significantly, they will eventually run out of room to lower them anymore. At this point profits will start falling off until one firm gives up and restores its previous price level or leaves the market entirely (which we don’t want). Other firms may follow suit if they see that their competitor has been able to restore its profits by raising its price again.
Game theory is a mathematical model of strategy. It is used to analyze the behavior of players in situations of conflict and cooperation. The most popular game theory models are those that deal with contests between only two contestants, called "zero-sum games." Zero-sum games have been widely used by economists because they involve direct conflict between the participants' interests. Game theory has also been applied to oligopoly markets where firms compete for market share as well as for-profits.