You are NOT required to read the oligopoly chapter in the textbook, but you already know quite a lot about it from our discussion of strategic interactions using game theory in weeks 2-3. This market structure is between monopoly and monopolistic competition, with only a handful of firms having a high degree of market power. Let's refresh your memory with the following example. Assume that the Australian low-cost airline industry consists of two firms and their situation can be represented by the following payoff matrix.

Tigar Air Nothing Low Price More Advertising Nothing 10, 10 0, 16 2, 14 Jetstar Low Price 16, 0 6, 6 12, 4 More Advertising 14, 2 4, 12 8,8