In an oligopoly, companies are interdependent; They are influenced not only by their own decisions about how much to produce, but also by decisions made by other companies in the market. Game theory provides a useful framework for thinking about how companies can act in the context of this interdependence. Specifically, game theory can be used to model situations in which each actor must also consider how others might react to this action when deciding on an approach. A true duopoly is a special type of oligopoly where there are only two manufacturers in a market. There are two main models of duopoly: Cournot-Duopol and Bertrand-Duopole. An agreement is a formal agreement between companies with the aim of increasing profits. Agreements can take many forms in different types of markets. In each scenario, groups enjoy an unfair advantage. One of the most common types of cartels is price fixing.
Price agreements occur when a small number of companies are called oligopolies in a given supply market. This limited number of companies offers the same product and establishes an agreement to set the price level. Prices may be reduced by force to market smaller competitors, or they may have an excessive level to support the interest of the group at the expense of the buyer. Overall, price agreements can eliminate or reduce competition, while creating even greater barriers for new entrants. In the study of the economy and competition in the market, collusion takes place within a sector when competing companies cooperate for their mutual benefit. .