Theory of the firm pt 2 Flashcards
Monopoly
The dominant firm in the industry, the extent of monopoly’s power depends on the closeness of the substitutes
A natural monopoly
A situation when the LRAC curve would be lower if an industry were under a monopoly that shared 2 or more firms
Contestable markets
A theory that suggests monopolies will be both productively and allocatively efficient if they need to stop competitors entering the market
Non Price Competition
Competition based not on price but factors such as service,
product differentiation
R and D
advertising
Collusive oligopoly
where oligopolies agree to set a limit on competition between themselves through, setting output quotas, fix prices, limit production promotion or development, and not poach other markets
Non collusive oligopoly
where oligopolies have no agreement between them
Perfect oligopoly
When at few firms produce identical product
Imperfect oligopoly
When few firms produce a differentiated product
Duopoly
When there are only two firms in an industry
Cartel
A formal collusive agreement between a small number of firms
Tacit collusion
Where oligopolists take care not to engage in the price cutting, excessive advertising and other forms of competition
Price leadership
When firms choose the same price that is set by the dominant firm in the industry
Game theory
The mathematical technique analysing the behaviour of decision makers that depend on each other and use strategic behaviour to anticipate the behaviour of their rivals
