Chapter 8 - pt 1 (start of Mid-term II)

Question 1

competitive dynamics

Answer 1

Actions and responses undertaken by competing firms

Question 2

competitor analysis

Answer 2

The process of anticipating rivals’ actions in order to both revise a firm’s plan and prepare to deal with rivals’ responses

Question 3

multimarket competition

Answer 3

Firms engage the same rivals in multiple markets

Question 4

mutual forbearance

Answer 4

Multimarket firms respect their rivals’ spheres of influence in certain markets and their rivals reciprocate, leading to tacit collusion

Question 5

collusion

Answer 5

Collective attempts between competing firms to reduce competition

Question 6

coordination

Answer 6

Formal or informal cooperation among competitors

Question 7

tacit collusion

Answer 7

Firms indirectly coordinate actions to reduce competition by signaling to others their intention to reduce output and maintain pricing above competitive levels

Question 8

explicit collusion

Answer 8

Firms directly negotiate output, fix pricing, and divide markets

Question 9

cartel

Answer 9

An entity that engages in output fixing and price fixing, involving multiple competitors. Also known as a trust.

Question 10

trust

Answer 10

Cartel

Question 11

antitrust law

Answer 11

A law that attempts to curtail anti-competitive business practices such as cartels and trusts

Question 12

prisoner’s dilemma

Answer 12

In game theory, a type of game in which the outcome depends on two parties deciding whether to cooperate or defect

Question 13

game theory

Answer 13

A theory that focuses on competitive and cooperative interaction (such as in a prisoner’s dilemma situation)

Question 14

concentration ratio

Answer 14

The percentage of total industry sales accounted for by the top four firms

Question 15

price leader

Answer 15

A firm that has a dominant market share and sets “acceptable” prices and margins in the industry

Question 16

capacity to punish

Answer 16

Having sufficient resources to deter and combat defection

Question 17

market commonality

Answer 17

The degree to which two competitors’ markets overlap

Question 18

sphere of influence

Answer 18

Dominance acknowledged by competitors

Question 19

cross-market retaliation

Answer 19

Retaliation in other markets when one market is attacked by rivals

Question 20

fighter brand

Answer 20

A brand (and subsidiary) designed to combat low-cost rivals while protecting the incumbent’s premium offerings

Question 21

resource similarity

Answer 21

The extent to which a given competitor possesses strategic endowments comparable to those of the focal firm

Question 22

Chapter 8 title

Answer 22

Managing Competitive Dynamics