Chapter 14 - Oligopoly Flashcards Preview

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Flashcards in Chapter 14 - Oligopoly Deck (16):
1

oligopoly

A form of industry (market) structure characterized by a few dominant firms. Products may be homogenous
or differentiated.

2

Five Forces model

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry.

3

concentration ratio

The share of industry output in sales or employment accounted for by the top firms.

4

contestable markets

Markets in which entry and exit are easy.

5

cartel

A group of firms that gets together and makes joint price and output decisions to maximize joint profits.

6

tacit collusion

Collusion occurs when price- and quantity-fixing agreements among producers are explicit. Tacit collusion occurs when such agreements are implicit.

7

price leadership

A form of oligopoly in which one dominant firm sets prices and all the smaller firms in the industry follow its pricing policy.

8

duopoly

A two-firm oligopoly.

9

game theory

Analyzes the choices made by rival firms, people, and even governments when they are trying to maximize their own well-being while anticipating and reacting to the actions of others in their environment.

10

dominant strategy

In game theory, a strategy that is best no matter what the
opposition does.

11

prisoners’ dilemma

A game in which the players are prevented from cooperating and in which each has a dominant strategy that leaves them both worse off than if they could cooperate.

12

Nash equilibrium

In game theory, the result of all players’
playing their best strategy given what their competitors are doing.

13

maximin strategy

In game theory, a strategy chosen to maximize the minimum gain that can be earned.

14

tit-for-tat strategy

A repeated game strategy in which a player responds in kind to an opponent’s play.

15

Celler-Kefauver Act

Extended the government’s authority to control mergers.

16

Herfindahl-Hirschman Index (HHI)

An index of market concentration found by summing the square of percentage shares of firms in the market.