Foundations of Economics, 8th Edition

18.2 The Oligopolists’ Dilemma

MyEconLab Concept Video

Oligopoly might operate like monopoly, like perfect competition, or somewhere between these two extremes. To see these alternative possible outcomes, we’ll study duopoly in the market for airplanes. Airbus and Boeing are the only makers of large commercial jet aircraft. Suppose that they have identical costs. To keep the numbers simple, assume that total fixed cost is zero and that regardless of the rate of production, the marginal cost of producing an airplane is $1 million.

Boeing and Airbus share the market for big passenger airplanes.

Figure 18.2 shows the market demand curve for ...