Microeconomics:?

Question

What is the difference in the demand faced by oligopoly firms that do not collude and oligopolies that collude to act together? Explain the profit maximization rule for oligopolies.

Answer 1

If they collude, together they face the market demand curve.  If they do not collude, they face the residual demand curve.  The profit maximization rule is to assume that the other firm is also maximizing their profits, find MR from the residual demand curve, and set it equal to MC