ch 9: Flashcards
Because the manager of a firm competing in a _______________ oligopoly believes other firms will match any price decrease but not match price increases,
Sweezy
An industry in which (1) there are few firms serving many consumers; (2) firms produce differentiated products; (3) each firm believes rivals will respond to a price reduction but will not follow a price increase; and (4) barriers to entry exist.
Sweezy oligopoly
firms competing in a __________ oligopoly may not increase output when marginal cost declines,
Sweezy
An industry in which (1) there are few firms serving many consumers; (2) firms produce either differentiated or homogeneous products; (3) each firm believes rivals will hold their output constant if it changes its output; and (4) barriers to entry exist.
Cournot oligopoly
firms differ with respect to when they make decisions. Specifically, one firm (the leader) is assumed to make an output decision before the other firms.
Stackelberg Oligopoly
An industry in which (1) there are few firms serving many consumers; (2) firms produce either differentiated or homogeneous products; (3) a single firm (the leader) chooses an output before rivals select their outputs; (4) all other firms (the followers) take the leader’s output as given and select outputs that maximize profits given the leader’s output; and (5) barriers to entry exist.
Stackelberg Oligopoly
The treatment here assumes the firms sell identical products and that consumers are willing to pay the (finite) monopoly price for the good.
Bertrand Oligopoly
An industry in which (1) there are few firms serving many consumers; (2) firms produce identical products at a constant marginal cost; (3) firms compete in price and react optimally to competitors’ prices; (4) consumers have perfect information and there are no transaction costs; and (5) barriers to entry exist.
Bertrand Oligopoly
Whenever a market is dominated by only a few firms, firms can benefit at the expense of
consumers by “agreeing” to restrict output or, equivalently, to charge higher prices.
Collusion
A market in which (1) all firms have access to the same technology; (2) consumers respond quickly to price changes; (3) existing firms cannot respond quickly to entry by lowering their prices; and (4) there are no sunk costs.
contestable market
suppose a market is served by a single firm, but there is another firm (a potential entrant) free
to enter the market whenever it chooses.
contestable market
A cost that is forever lost
after it has been paid.
sunk cost
