Monopolistic competition and Oligopoly

Oligopoly

A market structure characterize by a few large producers, of either standardized or differentiated products, operating in industries with extensive entry barriers. These producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products

Monopolistic competition

A market structure characterized by a relatively large number of sellers producing a differentiated product, for which they have some control over the price they charge, in a market with relatively easy market entry and exit

Payoff matrix

a table showing the potential outcomes arising from the choices made by decisionmakers

Dominant strategy

A situation in which a particular strategy yields the highest payoff regardless of the other player's strategy

Collusion

A situation in which individuals, firms, or any group of actors coordinate their actions to achieve a desired outcome. Collusion is generally used to achieve an outcome that would not be possible in the absence of coordinated actions, and it is typically associated with illegal or anticompetitive behaviors

Mutually interdependent

A situation in which the strategy followed by one producer will likely affect the profits and behavior of another producer

Nash equilibrium

An outcome in which, unless the players collude, neither player has an incentive to change his or her strategy

Product differentiation

The strategy of distinguishing one firm's product from the competing products of other firms

Game theory

The study of the strategic behavior of decision makers

Excess capacity

The underutilization of resources that occurs when the quantity of output a firm chooses to produce is less than the quantity that minimizes average total cost

Deadweight loss

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium