Market structure: Monopolistic competition and oligopoly Flashcards
Define Monopolistic competition
a market that shares some characteristics of monopoly and some of perfect competition
Define product differentiation
a strategy adopted by firms that marks their product as being different from their competitors
What is the n-firm concentration ratio
a measure of the market share of the largest n firms in an industry
Define Oligopoly
A market with a few sellers, in which each firm must take account of the behaviour of rival firms in the industry
What is game theory?
a method of modelling the strategic interaction between firms in an oligopoly
What is the prisoners’ dilemma?
an example of game theory with a range of applications in oligopoly theory
What is dominant strategy?
a situation in game theory where a player’s best strategy is independent of those chosen by others.
What is the Nash Equilibrium?
situation occurring within a game when each player’s chosen strategy maximises payoffs given the other player’s choice, so that no player has an incentive to alter behaviour
Define Cartel
an agreement between firms on price and output with the intention of maximising their joint profits
Define overt collusion
a situation in which firms openly work together to agree prices or market shares
Define tacit collusion
situation occurring when firms refrain from competing on price, but without communication or formal agreement between them
Define non-price competition
steps that firms can take to compete with rival firms other than on price, such as advertising or product differentiation.
Define monospony
a market in which there is a single buyer of a good, service or factor of production
Define oligopsony
a market in which there are a few buyers of a good, service or factor of production
