Chapter 17 Journal

Chapter 17 elaborated about the middle ground between the two extremes seen in the previous two chapters, monopoly and competitive market. Chapter 17 talked about oligopolies, markets with few sellers as competition and has market power but not significant compared to the others. They maximize their total profits by forming a cartel and acting like a monopoly. But if all the firms make decisions based on their self-interest, the result is a greater quantity of output and a lower prince than under the monopoly outcome. The larger the number of firms in the oligopoly, the closer the quantity and price will be to the levels of a competitive market. An example that clearly depicts this problem between oligopolies is the prisoners' dilemma. It shows that self-interest can prevent people from maintaining cooperation, even when it is in their mutual interest. Both sides will succumb to their self-interest and it ends up worse than if they actually would have cooperated. Government could also play a role in this market. Policymakers use antitrust laws to prevent oligopolies from cooperation and engaging in behavior that reduces competition. Although some behavior that may seem to reduce competition may have legitimate business purposes. Overall, this chapter was a nice read and it was good to finally see the market between the two extremes. The multitude of examples made this chapter really easy to grasp. It was a easy read and on a scale of 1-3, I would give this chapter a 1.