Chapter 18 Flashcards
What is an oligopoly
A market where a few sellers supply similar or identical products
- have high barriers
- have control over price
What are the three components of a oligopoly
- Price leadership
- Non-colluding (can either match price or ignore change)
- Colluding
- includes cartels
What is game theory
Situations where someone is making a decision so they must consider how others will respond to their decision
What is a duopoly
An oligopoly market with only two sellers
What are cartels
They choose the total quantity supplied for the market and how much each business will produce
What is a Nash equilibrium
When people/firms make decisions simultaneously and have no incentive to change
What is the output effect
Selling one more unit increases profit since the price is above the marginal cost
What is the price effect
Selling one more unit increases the market quantity supplied, which will reduce the price of cell phone plans and reduce the profits on all of the other cell phone plans that were sold
What is the prisoners dilemma
When people do not cooperate even though it would make everyone better off
