Chapter 13: Oligopoly and Strategic behavior

Question 1

Anti trust laws

Answer 1

attempt to prevent oligopolies from behaving like monopolies p396

Question 2

backwards induciton

Answer 2

in game theory, is the process of deducing backwards from the end of a scenario to infer a sequence of optimal actions. p409

Question 3

cartel

Answer 3

a group of two or more firms that act in unison p396

Question 4

clayton act

Answer 4

targets corporate behaviors that reduce competition. Made to strengthen anti trust law suits. p413

Question 5

collusion

Answer 5

an agreement among rival firms that specifies the price firms charges and quantity produced. illegal and p395

Question 6

decision tree

Answer 6

illustrates all of the possible outcomes in a sequential game. p409

Question 7

dominant strategy

Answer 7

the best strategy to win, regardless of opponents choices.. the meta p402

Question 8

game theory

Answer 8

a branch of mathematics that economists use to analyze the strategic behavior. p400

Question 9

mutual interedependence

Answer 9

p396

Question 10

Nash equilibrium

Answer 10

a law that no one would like to break, even in absence of police force. p398

Question 11

network externality

Answer 11

occurs when the number of customers who purchase or use a good influences the quantity demanded p416

Question 12

oligopoly

Answer 12

a form of market structure that exists when a small number of firms sell a differentiated product in a market w/ high barriers to entry. p392

Question 13

output effect

Answer 13

occurs when a change in price affects the number of customers in a market p400

Question 14

predatory pricing

Answer 14

the practice of a firm deliberately setting its prices below AVC with the intent of driving rivals out of the market p413

Question 15

price effect

Answer 15

how a change in price affects the firms revenue p400

Question 16

prisoners dilemma

Answer 16

occurs when decision makers face incentives that make it difficult to achieve mutually beneficial outcomes. p401

Question 17

Sherman antitrust act

Answer 17

was the first federal law limiting cartels and monopolies. made in 1890 p413

Question 18

switching costs

Answer 18

are the costs incurred when a consumer charges from one supplier to another p416

Question 19

tit for tat

Answer 19

a long term strategy where you mimic you opponents recent move. only works when there is trust among opponents. p406

Question 20

Kinked demand curve

Answer 20

the theory that oligopolists have a greater tendency to respond aggressively to price cuts of rivals but will ignore price increases

Question 21

Price leadership

Answer 21

when a dominant firm in an industry sets the price that max profits and smaller firms follow by setting their prices to match the price leader.