Chapter 15 - Oligopoly
At the Nash equilibrium, Novo's economic profit is _____ million and Pharm's economic profit is _____ million.
$10; $10
Which of the following is an example of strategies?
Dell makes an annual economic profit of $5 billion by investing in R&D and an economic profit of $6 billion by not investing in R&D.
In the prisoners' dilemma, when each player takes the best possible action given the action of the other player, _____.
a Nash equilibrium is reached
A payoff matrix is a table that shows the payoffs for each player for every possible combination of _____ the players.
actions by
Firms in oligopoly face a temptation to collude because collusion _____.
allows firms to act like a monopoly and increase their profits
The PC chip market is a duopoly if _____.
at the efficient scale, two firms can satisfy the market demand
The Nash equilibrium for the prisoners' dilemma is called a dominant-strategy equilibrium, which is an equilibrium in which the best strategy of each player is to _____ the strategy of the other player.
cheat (confess) regardless
Firms in oligopoly are interdependent because _____.
each firm's actions influence the profits of all the other firms.
Nash equilibrium is an equilibrium in which each player takes the best possible action _____ the action of the other player.
given
In an R&D game of chicken, a firm can use the R&D _____. The outcome is that _____.
if either it or its competitor conducts the R&D; one firm conducts R&D
A cartel is a group of firms acting together to _____ output, _____ price, and increase _____.
limit; raise; economic profit
Firms do not succeed in raising price and profits because each firm _____.
makes greater economic profit if it cheats on the agreement, regardless of how the other firm acts
A collusive agreement is an agreement between two (or more) producers to form a cartel to _____ output, _____ the price, and _____.
restrict; raise; increase profits
Oligopoly is a market in which a _____ number of _____ firms compete.
small; interdependent
A duopoly occurs when _____.
two producers of a particular good compete in the same market
In the prisoners' dilemma game, each player faces _____.
two strategies, confess or deny, and there are four possible outcomes.
In game theory, strategies include _____.
all possible actions of each player
The Nash equilibrium is that _____.
both Amy and Ben develop the new product
If this game is played just once, the Nash equilibrium is _____.
both Pat and Danny break the collusion.
The Nash equilibrium is that Black _____ and White _____.
breaks agreement; breaks agreement
In a duopoly with a collusive agreement, a firm's best strategy is to _____, and to _____.
cheat if the other firm complies; cheat if the other firm cheats
The equilibrium strategy for each firm in a duopolists' dilemma is to _____.
cheat on the agreement
The strategies in this game are _____.
cheat on the agreement or comply with the agreement
In a duopoly with a collusive agreement to restrict output and raise the price, a firm's best strategy is to _____ if the other firm complies, and to _____ if the other firm cheats.
cheat; cheat
If the game is played only once, the equilibrium of the game is that Soapy _____ and Suddies _____.
cheats; cheats
The Nash equilibrium delivers a bad outcome for both players because _____.
regardless of what the other prisoner does, the best strategy for each prisoner is to confess
The common features of all games are _____.
rules, strategies, payoffs, and an outcome
A collusive agreement creates a game like the prisoners' dilemma because _____.
the outcome is worse than if both firms held to the agreement
Firms in a collusive agreement have an incentive to cheat and increase production because _____.
the profit received by a cheating firm when all other firms comply is greater than the profit received when all firms comply
In the prisoners' dilemma R&D game, a firm can use the R&D _____. The outcome is that _____.
only if it conducts the R&D; both firms undertake R&D
Which of the following is an example of a duopoly market?
Visa and MasterCard exercise control over the electronic payment processing market in the world.
The equilibrium _____ a dominant strategy equilibrium because the best strategy in this game is for a firm _____.
is; to cheat regardless of the other firm's choice
The energy-drink market might be dominated by two firms because _____.
large economies of scale may make them a natural oligopoly
Game theory is the tool that economists use to analyze strategic behavior - behavior that recognizes _____ and _____ account of the expected behavior of others.
mutual interdependence; takes
The two distinguishing characteristics of oligopoly are _____.
natural or legal barriers prevent the entry of new firms, and a small number of firms compete.
The structure of the energy-drink market is _____.
oligopoly because it is dominated by two firms with a market share of 65 percent.
In the prisoners' dilemma, the _____ gives the equilibrium as _____.
payoff matrix; a bad outcome for both players