Oligopoly and Interdependence in the Classroom

Margaret A. Ray

Industrial Organization
Game Theory

Non-computerized experiment

After discussing perfectly competitive and monopoly market structures, most introductory courses cover oligopolies. I have found that the key to students understanding oligopoly market structures is for them to appreciate interdependence. When I first tell classes that oligopolies are interdependent, they are thrilled to know (after perfect competition and monopoly) that this means no curves (I don't use kinked demand). The thrill is somewhat abated when they realize that it means an alternative treatment is necessary, and it might be worse than the curves were. This is where I think it is important to give the students a sense of the behavioral nature of the models as well as to point out that oligopolies are much more common in the economy. This is a great juncture for introducing a classroom experiment or exercise.