Chapter 11 Flashcards
Cartel
A group of firms that selects a common price that maximizes their combined profits
Concentration Ratio
The percentage of total output or sales by a given number of the largest firms in the market
Dominant strategy
A strategy that is best for a player no matter what strategy the other player chooses
Duopoly
An oligopoly market with only two sellers
Explicit Collusion
Cooperation involving direct communication between competing firms about setting prices
Game Theory
An approach to modeling the strategic interaction of oligopolists in terms of moves and counter-moves
Herfindahl-Hirschman Index (HHI)
A measure of market concentration obtained by summing the squares of each firm’s market share
Imperfect competition
A market structure in which there is more than one firm but one or more of the requirements of perfect competition is violated
Monopolistic Competition
A market structure in which there are many firms selling products that are differentiated, and win which there is easy entry and exit
Natural Oligopoly
A market that tends naturally toward oligopoly because the minimum efficient scale of the typical firm is a large fraction of the market
Nonprice Competition
Any action a firm takes to shift its demand curve rightward
Oligopoly
A market dominated by a small number of strategically interdependent interacting firms
Payoff Matrix
A table showing the payoffs to each of two players for each pair of strategies they choose
Price Leadership
A form of tacit collusion in which one firm sets a price that other firms copy
Repeated Play
A situation in which strategically interdependent sellers compete over many time periods
