Chapter 12 Key Terms Flashcards
monopolistic competition
a market in which products are heterogeneous but which is otherwise the same as a market that is perfectly competitive
oligopoly
a market dominated by a few sellers, at least several of which are large enough relative to the total market to be able to influence the market price
cartel
a group of sellers of a product who have joined together to control its production, sales, and price in the hope of obtaining the advantages of monopoly
price leadership
when one firm sets the price for the industry and the others follow
price war
when each competing firm is determined to sell at a price that is lower than the prices of its rival, often regardless of whether that price covers the pertinent cost
sales maximiization
the objective of a firm that seeks to adopt prices and output quantities that make its total revenue (the money value of its sales) rather than its profits, as large as possible
kinked demand curve
a demand curve that changes its slope abruptly at some level of output
sticky price
a price that does not change often even when there is a moderate change in cost
payoff matrix
shows how much each of two competitors (players) can expect to earn, depending on the strategic choices each of them makes
dominant strategy
a strategy of one of the competitors in a game that will yield a higher payoff than any of the other strategies that are possible, no matter what choice of strategy is made by competitors
maximin criterion
requires a player to select the strategy that yields the maximum payoff on the assumption that the opponent will do as much damage as it can
Nash equilibrium
when each player adopts the strategy that gives the highest possible payoff if the rival sticks to the strategy it has chosen
zero-sum game
when exactly the amount one competitor gains must be lost by other competitors
repeated game
a game that is played over again a number of times
credible threat
a threat that does not harm the threatener if it is carried out
