oligopoly Flashcards
what is a oligopoly
its a small number of firms offering a similar or identical products
what is collusion
its the agreement amongst firms in a market about what quantities to produce or what prices to change
what is a cartel
agreement to obey output restrictions in order to increase profits
what is the problem with collusion
each firm has incentive to cheat and produce more and will likely end up cheating since we are maximizers
what is the prisoners’ dilemma
it shows the difficulty of co operation because people will always choose what’s best for them and they will also assume that if they don’t cheat the other person will
what is the dominate strategy
its thee option that is the best for the firm regardless of what the other firm does
what is the Nash equilibrium
what would happen if both firms chose what was best for themselves and in this scenario they will both be worse off compared to if they co operated
what is the tit for tat strategy
its cooperating at first but then doing the same thing that the other firm did in the last period
