Please Read Chapter 10 and Answer the Following Questions: Essay
1. (Varieties of Oligopolies) do the firms in an oligopoly act independently or interdependently? Explain your answer.
2. (Price Leadership) why might a price–leadership model of oligopoly not be an effective means of collusion in an oligopoly? * Price leadership practices violate US anti-trust laws. * The more differentiated the product is, the less effective price leadership is as a means of collusion. * There is no guarantee firms will follow the leader forcing the leading firm to reduce prices. * Cheating may occur. * A new entry can destabilize the price leader's position…
-If a price leader in an oligopolistic market sets price and output in order …show more content…
OPEC may face a Shia-Sunni split if the political climate in the region and crude prices deteriorate…
* "A growing Sunni-Shia split within OPEC may threaten the management of the oil market in the event of downward pressure on prices if the global economy reverts to recession,"
* “There are also divisions between pro- and anti-Western members, which have tended to replicate the division between those favoring pricing oil in dollars and those preferring an alternative currency such as the euro.”
* ”There is the division between countries that can easily produce more than their quotas and those struggling to meet their quotas.”
* The recent intervention of Saudi Arabia in Bahrain has brought relations with Iran to an extremely low point “This is likely to last as the Arab uprisings deepen divisions between Sunni and Shi’a regimes in the region. It aggravates the already poor relationship between King Abdullah and Nouri Al Maliki’s Shi’a government in Iraq.”
* Events are now more complicated as the international sanctions against Tehran start to weigh in on oil prices.
* Iran has warned Gulf States not to