Final answer:
A competitive oligopoly is typically less efficient than colluding oligopolists due to the prisoner's dilemma incentives driving firms towards competition rather than collaboration, but it's more efficient than a monopolist because oligopolistic competition can sometimes lead to results that resemble perfect competition.
Step-by-step explanation:
The outcome of a competitive oligopoly is typically less efficient than that of colluding oligopolists but more efficient than that of a monopolist. In a competitive oligopoly, firms face a prisoner's dilemma where they could collaborate and act like a monopoly to maximize combined profits by producing a lower output and charging higher prices.
However, the temptation for individual firms to deviate from the collusive agreement to capture greater market share by increasing output and decreasing prices often lead to a more competitive market outcome. Collusion, if sustained, would lead to monopolistic profits, but the individual incentives to compete can make the market resemble one of perfect competition in terms of prices and quantity. Unlike perfect competition, however, oligopolistic and monopolistically competitive firms do not operate at the lowest point on their average cost curves, hence are not productively efficient.