Chapter 18 Oligopoly

Prisoners dilemma

A game between two prisoners that show why it is hard to cooperate even when it would be beneficial to both players to do so.

Cartel

A group of firms acting together to limit output, raise price, and increase economic profit

Duopoly

A market with only two firms.

Oligopoly

A small number of firms compete Natural or legal barriers prevent the entry of new firms

Ting arragement

An agreement to sell one product only if the buyer agrees to buy another , different product.

Nash Equilibrium

An equilibrium in which each player takes the best possible action given the action of the other player.

When oligopolies seek to operate as a single-price monopoly, the firms produce at the point where

MR = MC.

payoff matrix

a table that shows the payoffs for every possible action by each player given every possible action by the other player.

strategies

all the possible actions of each player in a game.

Resale price maintenance

an agreement between a manufacturer and a distributor on the price at which a product will be resold.

According to Section 2 of the Sherman Act, which of the following is a felony?

attempts to monopolize an industry

Antitrust law

is the body of law the regulates oligopolies and prohibits them from becoming monopolies or behaving like monopolies

When a city licenses only 3 taxi firms to serve the market, the city has created a

legal oligopoly

Long-run economic profits are most likely to be earned in

monopoly and oligopoly.

The very best joint outcome possible for the firms in a duopoly is to produce the

monopoly level of output.

Predatory Pricing

setting a low price to drive competitors out of business with the intention of setting a monopoly price when the competition has gone.

game theory

tool economists use to analyze strategic behavior- behavior that recognizes mutual interdependence and makes takes account of the expected behavior of others.(Oligopoly)