Introduction. 2. Two types of behaviour (Collusive and non-collusive).3. Game theory.a.) Concept.b.) The problem of collusion.c.) Predatory pricing.4. Repeated games approach.a.) Concept.b.) Finite game case.c.) Infinite game case.i.) "Trigger" strategyii.) Tit-for-Tat. d.) Finite game case, Kreps approach.5. The motives for retaliation.6. Conclusion.7. Bibliography.1. Introduction. In this essay I would discuss the price and output determination under the one essential type of imperfect competition markets- oligopoly. Inter-firm interactions in imperfect markets take many forms. Oligopoly theory, those name refers to "competition among the few", lack unambiguous results of these interactions unlike monopoly and perfect competition. There is a variety of results derived from many different behavioural assumptions, with each specific model potentially relevant to certain real-world situations, but not to others. Here we are interested in the strategic nature of competition between firms. "Strategic" means the dependence of each person's proper choice of action on what he expects the other to do. A strategic move of a person influences the other person's choice, the other person's expectation of how would this particular person behave, in order to produce the favourable outcome for him. 2. Two types of behaviour (Collusive and non-collusive). Models of enterprise decision making in oligopoly derive their special features from the fact that firms in an oligopolistic industry are interdependent and this is realised by these firms. When there are only a few producers, the reaction of rivals should be taken into account. There are two broad approaches to this problem. First, oligopolists may be thought of as agreeing to co-operate in setting price and quantity. This would be the Collusive model. According to this model, firms agree to act together in their price and quantity decisions and this would to exactly the same outco...
