Oligopolies Flashcards
Markets differ according to:
- Number of firms in the market
- Barriers to entry and exit
- Ability of firms to differentiate products
In oligopolies, power is collectively:
Shared
In Oligopoly, firms can’t ignore:
Competitors behaviour
What are the three different models of oligopoly?
- Cournot
- Bertrand
- Stackelberg
Whats the basis of Cournot?
- Firms decide quantity
- Price adjusts to consumer demand
Whats the basis of Bertrand?
-Firms set prices and sell whatever is demanded at those prices
What’s the basis of Stackelberg?
- First mover advantage
- Timing matters
What is game theory?
Set of tools used by economists and others to analyze strategic decision making
What is a game?
An interaction between players in which players use strategies
What are the payoffs of a game?
Player’s valuation of the outcome of the game (profits etc)
What are the ‘rules’ of a game?
The timing of player’s moves and actions at each move
What is an action?
A move that a player makes at a specified stage of a game
What does strategic interdependence mean?
When a player’s optimal strategy depends on others actions
In a static game, each player acts:
- Simultaneously
- Only once
Rational players will avoid strategies that are:
Dominated by other strategies
