Oligopoly Flashcards
Firms must take the potential reaction of its closest rivals into account when making its own decisions
Interdependence
The market is characterized by imperfect knowledge, where costumers don’t know the best price or availability
Information
This is used to explain the price inflexibility in an oligopolistic market
Sweezy’s model
This is used when firms produce identical or standardized product and don’t collude
Cournot model
In this model, one firm serves as the industry leader
Stackelberg model
This model examines price competition among firms that produce highly substitutable goods
Bertrand duopoly market
This type of collusion occurs when firms try to hide the results of their collusion
Covert
This collusion arises when firm act together, but there is no agreement among firms
Tacit
This is an analytical guide or tool for making decisions in situations involving interdependence
Game theory
One player’s gain is another player’s loss (ex. a costumer buys from one firm and not the other)
Zero-sum games
These are games with the potential for mutual profit (ex. when two nations trade goods and services)
Positive-sum games
These are games with the potential for mutual loss (ex. when diplomatic relations between countries fail and there is a war)
Negative-sum games
In this game, players make their decisions at the same time (ex. rock paper scissors game)
Simultaneous-move games
In this game, one player move first, then the other person gets to respond (ex. tictac toe and chess)
Sequential-move games
This game is played only oncrr, and is not repeated by the other players
One-shot games
In this game, players know that the game is played again over a time period
Repeated games
This is a type of strategy where the player attempts to earn a maximum possible benefit available
Maximax
This strategy is where a player chooses the best of the worst pay-off
Maximin
It is the best outcome irrespective of what the other player chooses
Dominant strategy
This isba 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
Nash equilibrium
