Oligopoly Flashcards
Concentration ratio
Proportion of total market share accounted for by a particular number of firms
Oligopoly
Competition amongst the few- market structure in which only a few sellers offer similar or identical products and dominate the market
Market segments
The breaking down of customers into groups with similar buying habits or characteristics
Interdependence
What one firm does has some influence on the others and each firm may or may not reach to the decisions of others
Collusion
An agreement amount firms in a market about quantities to produce or prices to change
Cartel
Group of firms acting in unison
Nash equilibrium
Situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
Dominant strategy
Is best outcome irrespective of what the other player chooses
Tit-for-tat strategy
Each player follows course of action which is consistent with their opponents previous turn
Kinked demand curve
Diff elasticities
Sticky prices
Non price competition
Situation where 2 or more firms seek to increase demand and ,arrest share by methods other than through changing price
Game theory
Study of how people behave in strategic situations
Payoff matrix
Table showing the poss combination of outcomes (payoffs) depending on the strategy chosen by each player
Prisoners dilemma
Particular game between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
Tactic collusion
When firm behaviour results in a market outcome that appears to be anti-competitive but has arisen because firms acknowledge that they are interdependent
Residual demand
The difference between the market demand curve and the amount supplied by other firms in the market
Reaction function
The decision of one firm on a particular issue such as the profit max output in response to the profit max output decisions of its rivals
The Bertrand model
Firms strategies based on setting price- competing on prices not output
Stackelberg model
Looks at what equilibrium output would be for 2 firms if one firm was the leader taking decisions first but considering what the other firm would do in response
Controversies over competition policy
Resale price maintenance
Predatory pricing
Tying
