Chapter 14 - Oligopoly Flashcards

1
Q

oligopoly

A

A form of industry (market) structure characterized by a few dominant firms. Products may be homogenous
or differentiated.

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2
Q

Five Forces model

A

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry.

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3
Q

concentration ratio

A

The share of industry output in sales or employment accounted for by the top firms.

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4
Q

contestable markets

A

Markets in which entry and exit are easy.

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5
Q

cartel

A

A group of firms that gets together and makes joint price and output decisions to maximize joint profits.

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6
Q

tacit collusion

A

Collusion occurs when price- and quantity-fixing agreements among producers are explicit. Tacit collusion occurs when such agreements are implicit.

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7
Q

price leadership

A

A form of oligopoly in which one dominant firm sets prices and all the smaller firms in the industry follow its pricing policy.

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8
Q

duopoly

A

A two-firm oligopoly.

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9
Q

game theory

A

Analyzes the choices made by rival firms, people, and even governments when they are trying to maximize their own well-being while anticipating and reacting to the actions of others in their environment.

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10
Q

dominant strategy

A

In game theory, a strategy that is best no matter what the

opposition does.

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11
Q

prisoners’ dilemma

A

A game in which the players are prevented from cooperating and in which each has a dominant strategy that leaves them both worse off than if they could cooperate.

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12
Q

Nash equilibrium

A

In game theory, the result of all players’

playing their best strategy given what their competitors are doing.

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13
Q

maximin strategy

A

In game theory, a strategy chosen to maximize the minimum gain that can be earned.

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14
Q

tit-for-tat strategy

A

A repeated game strategy in which a player responds in kind to an opponent’s play.

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15
Q

Celler-Kefauver Act

A

Extended the government’s authority to control mergers.

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16
Q

Herfindahl-Hirschman Index (HHI)

A

An index of market concentration found by summing the square of percentage shares of firms in the market.