Question
The market for Ethyl, a chemical additive in gasoline, has been a very stable 4-firm oligopoly for many years, with pricing that is well above
The market for Ethyl, a chemical additive in gasoline, has been a very stable 4-firm oligopoly for many years, with pricing that is well above marginal cost.In the past, industry observers have referred to it as a "cozy oligopoly." Recently passed regulations will greatly restrict the demand starting 3 years from now: demand for Ethyl is forecasted to immediately decline by half. Industry observers are now predicting that the 2 smallest of the current 4 firms will exit the market when those regulations start to have an effect. What do you expect to happen to pricing in this industry?
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