Ch 17 - Oligopoly Flashcards
(16 cards)
oligopoly
a market in which there are only a few sellers; as a result, the actions of any one seller in the market can have a large impact on the profits of all other sellers
game theory
the study of how people behave in strategic situations
collusion
an agreement among firms in a market about quantities to produce & prices to charge
cartel
a group of firms acting in unison
Nash equilibrium
a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
prisoners’ dilemma
a particular “game” between to captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
dominant strategy
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
budget constraint
the limit on the consumption bundles that a consumer can afford
indifference curve
a curve that shows consumption bundes that give the consumer the same level of satisfaction
marginal rate of substitution (MRS)
the rate at which a consumer is willing to trade one good for another
perfect substitutes
two goods with straight-line indifference curves
perfect complements
two goods with right-angle indifference curves
normal good
a good desired more when income rises
inferior good
a good for which an increase in income reduces the quantity demanded (e.g., ramen)
income effect
the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve
substitution effect
the change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution
