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Managerial Economics > Oligopoly > Flashcards

Oligopoly Flashcards

1
Q

IBI

Characteristics of an Oligopoly

A
  1. Interdependence
  2. Barriers to Entry
  3. Information
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2
Q

Cite some barriers to entry in an oligopoly

A
  1. Large economies of scale
  2. Scarce resources
  3. Increase advertising
  4. Innovations
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3
Q

KCSB

Oligopoly Theories

A
  1. Kinked Demand Curve Model / Sweezy’s Model
  2. Cournot Model
  3. Stackelberg Model
  4. Bertrand Duopoly Market
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4
Q

Used to explain the price inflexibility in oligopoly

A

Kinked Demand Curve Model / Sweezy’s Model

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5
Q

Used when prices change very rarely.

A

Kinked Demand Curve Model / Sweezy’s Model

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6
Q

This theory assumes that when a firm lowers price, everyone lowers price to avoid losing customers and market share.

A

Kinked Demand Curve Model / Sweezy’s Model

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7
Q

When a firm raises its price, none of the rival firms would raise its price.

A

Kinked Demand Curve Model / Sweezy’s Model

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8
Q

FDBB

Characteristics of a Kinked Demand Curve Model / Sweezy’s Model

A
  1. Few firms in the market
  2. Differentiated products
  3. Believes rivals will cut their prices in response to a price reduction
  4. Barriers to entry exists
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9
Q

Used when firms produce identical or standardized products and don’t collude.

A

Cournot Model

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10
Q

One firm must determine the quantity they must sell at the same time that the other firms decide what quantity they would sell.

A

Cournot Model

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11
Q

Here, firms choose their quantities only once.

A

Cournot Model

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12
Q

FPBB

Characteristics of Cournot Model

A
  1. Few firms in market
  2. Produce either differentiated or homogenous products
  3. Believes that rivals will hold their output constant if it changes output
  4. Barriers to entry exists
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13
Q

In this model, one firm serves as the the industry leader.

A

Stackelberd Model

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14
Q

FPSOB

Characteristics of Stackelberg Model

A
  1. Few firms in the market
  2. Produces either differentiated or homogeneous products.
  3. Single firm chooses an output quantity before others
  4. Other will take the given output and choose outputs that maximize profits
  5. Barriers to entry exists
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15
Q

What’s the difference between Cournot Model and Stackelberg Model?

A

Cournot - Firms choose simultaneously

Stackelberg - Firms choose sequentially

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16
Q

It’s when one firm determines the profit maximizing quantity and the other firms react to that quantity.

A

Stackelberg Model

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17
Q

It’s when two firms make simultaneous choices.

A

Cournot Model

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18
Q

It examines price competition among firms that produce highly substitutable goods.

A

Bertrand Duopoly Market

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19
Q

FIEPB

Characteristics of Bertrand Duopoly Market

A
  1. Few firms in the market
  2. Identical products at a constant marginal cost
  3. Engages in price competition and reacts optimally
  4. Perfect information and no transaction costs
  5. Barriers to entry exists
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20
Q

In this model, the firms select the price that will maximize profits

A

Bertrand Duopoly Market

21
Q

In this two models, the focus is on quantity.

A

Cournot Model and Stackelberg Model

22
Q

What do you call when firms collude?

A

Collusive Oligopoly

23
Q

It often results to competition among firms.

A

Non-collusive Oligopoly

24
Q

It’s when participants act more like a monopoly and enjoy the benefits of higher profits.

A

Collusion

25
Q

Types of Collusion

A

Covert
Tacit

26
Q

It occurs when firms try to hide the results of their collusion.

A

Covert

27
Q

It arises when firms act together but there’s no agreement among themselves.

A

Tacit

28
Q

An analytical guide or tool for making decisions in situations involving interpendence.

A

Gane Theory

29
Q

It is any decision-making situation in which people compete with each other for the purpose of gaining the greatest individual pay-off.

A

Game

30
Q

It attempts to rake into consideration the interactions between the participant and their behavior to study the strategic decision-making between rational individuals

A

Game Theory

31
Q

ZPN

Types of Games according to Outcome

A

Zero-sum Games
Positive-sum Games
Negative-sum Games

32
Q

SSOR

Games according to how players decide their moves

A

Simultaneous-move games
Sequential-move games
One-shot games
Repeated games

33
Q

One player’s gain is another player’s loss

A

Zero-sum games

34
Q

Games with the potential for mutual profit.

A

Positive-sum games

35
Q

Games with the potential for mutual loss.

A

Negative-sum games

36
Q

Exists if you make a decision without knowing what other players decided.

A

Simultaneous-move games

37
Q

Everybody except the player who moved first gets to observe their rival’s decision before making their own decision.

A

Sequential-move games

38
Q

Played only once, not repeated by other players.

A

One-shot games

39
Q

Players know that the game is played again over a time period.

A

Repeated games

40
Q

A strategy when a player attempts to earn the maximum possible benefit available.

A

Maximax

41
Q

It’s often seen as naive since it assumes a highly favorable environment for decision making.

A

Maximax

42
Q

A strategy where a player chooses the best of the worst pay-off.

A

Maximin

43
Q

It’s commonly chosen when a player can’t rely on the other party to keep any agreement that has been made.

A

Maximin

44
Q

It’s the best outcome irrespective of what the other player chooses.

A

Dominant strategy

45
Q

It’s the solution to a game involving two or more players who want the best outcome for themselves and must take the actions of others into account.

A

Nash Equilibrium

46
Q

When this is achieved, players can’t improve their pay-off by changing their strategy.

A

Nash Equilibrium

47
Q

It is the best strategy assuming that the other party has chosen a strategy and will not change it.

A

Nash Equilibrium

48
Q

What happens when firms realize the strategy that leads to Nash Equilibrium?

A

They may revert to using randomized strategies - haphazard actions to keep rivals from predicting their strategic moves.

Managerial Economics (15 decks)

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