Oligopoly and Antitrust Policies

Question 1

Collusion

Answer 1

firms cooperating to raise profits

Question 2

Cartels

Answer 2

An agreement by several producers to restrict output in order to increase their joint profits

Question 3

Tacit collusion

Answer 3

each restricting output with the understanding that others will do so

Question 4

antitrust policies

Answer 4

efforts undertaken by the government to prevent oligopolistic industries from becoming or behaving like monopolies

Question 5

Game theory

Answer 5

the study of behavior in situations of interdependence; a way of predicting outcomes in strategic situations like oligopolies

Question 6

A dominant strategy

Answer 6

a player’s best action regardless of the action taken by the other player

Question 7

Best response

Answer 7

A player’s best action taking into account the actions of the other players

Question 8

Nash equilibrium

Answer 8

the result hen each player in a game chooses the action that maximizes his or her payoff given the actions of other players

Question 9

Sherman Antitrust Act (1890)

Answer 9

made restraint of trade illegal

Question 10

Clayton Act (1914)

Answer 10

restricted mergers that would substantially reduce competition

Question 11

Robinson-Patman Act (1936)

Answer 11

Strengthened provisions of Clayton Acts, outlawing price discrimination

Question 12

Celler- Kefauver Act (1936)

Answer 12

Further restrictions on mergers that would reduce competition

Question 13

market share:

Answer 13

the percentage of total sales in the market

Question 14

types of anti-trust policies

Answer 14

1. Price-fixing
2. Monopolization
3. Merger regulation

Question 15

“per se” illegal

Answer 15

Inherently illegal. No other circumstances matter
E.g., price fixing, market division

Question 16

“rule of reason” illegal

Answer 16

depends on the circumstances. Harm (to consumers) must be shown. Legitimate business reasons for the practice can justify the behavior
E.g., monopolization, predatory pricing, mergers