Section14 Flashcards
What is an oligopoly?
A market structure with only a few sellers offering similar or identical products, characterized by:
- high market concentration
- potential product differentiation
- barriers to entry
- interdependence among firms
What is the concentration ratio in an oligopoly?
- It measures the proportion of total market share controlled by a certain number of firms.
- If >50%, the market is considered an oligopoly.
How does production and pricing in an oligopoly compare to monopoly and perfect competition?
- Monopoly output < Oligopoly output < Perfect competition output
- Competitive market price < Oligopoly price < Monopoly price
What is a duopoly?
An oligopoly with only two firms, often analyzed for cooperative vs. non-cooperative behavior.
What is Nash Equilibrium in the context of oligopoly?
A situation where economic actors choose their best strategy given others’ strategies, resulting in no incentive to deviate from this point.
What is collusion?
An agreement among firms in an oligopoly on quantities to produce or prices to charge, often leading to cartel formation.
Why are cartels unstable?
Firms are tempted to increase production beyond agreed levels, believing others will not respond, leading to competition.
What is the Cournot Model?
An oligopoly model where firms produce a homogeneous good, assume competitors’ output is fixed, and decide quantities simultaneously.
What is the Prisoners’ Dilemma in oligopolies?
A scenario illustrating difficulty in maintaining cooperation; firms have an incentive to cheat for individual gain, harming collective outcomes.
What role does game theory play in oligopoly analysis?
It studies strategic interactions among firms, accounting for interdependence in decisions on output and pricing.
not sure if this is necessary
