Question

Distinguish between perfect oligopoly and imperfect oligopoly. Also explain the "interdependence between the firms" feature of oligopoly.

Answer 1

Difference between Perfect Oligopoly and Imperfect Oligopoly
Perfect Oligopoly: Form of oligopoly in which each firm produces a homogeneous product is known as perfect oligopoly.
Imperfect Oligopoly: Form of oligopoly in which each firm produces a differentiared product is known as imperfect oligopoly.
Feature of "interdependence between the firms" feature of oligopoly. There exists a very high degree of mutual interdependence between the firms in an oligopoly market. The price and the quality decisions of a particular firm are dependent on the price and the quality decisions of the rival (other) firms. Hence, a firm must take into consideration the probable rival reactions, while formulating its own price and output decisions.