Chapter 7

Question 1

Antitrust laws

Answer 1

laws that attempt to curtail anticompetitive business practices.

Question 2

Capacity to punish

Answer 2

defined as the capacity to punish. A firm that has sufficient resources to deter and combat defection.

Question 3

Cartel

Answer 3

an entity that engages in output and price-fixing involving multiple competitors.

Question 4

Collusion

Answer 4

defined as collective attempts between competing firms to reduce competition.

Question 5

Competitive dynamics

Answer 5

the actions and responses undertaken by competing firms.

Question 6

Competition policy

Answer 6

determines the institutional mix of competition and cooperation that gives rise to the market system.

Question 7

Competitor analysis

Answer 7

the process of anticipating a rivals’ actions in order to both revise a firm’s plan and prepare to deal with rivals’ responses.

Question 8

Concentration ratio:

Answer 8

the percentage of total industry sales accounted for by the top four, eight, or twenty firms.

The percentage of total industry sales accounted for by the top firms is called

Question 9

Cross-market retaliation

Answer 9

the ability of a firm to expand in a competitor’s market if the competitor attacks in its original market.

Question 10

Explicit collusion

Answer 10

the result of firms directly negotiating output and pricing and dividing markets.

Question 11

Game theory:

Answer 11

a branch of mathematics that studies the interactions between two competing parties.

Question 12

Market commonality

Answer 12

the overlap between two rivals’ markets.

Question 13

Multimarket competition:

Answer 13

when firms engage the same rivals in multiple markets.

Question 14

Mutual forbearance:

Answer 14

an act of strategic deterrence in which multimarket firms respect their rivals’ spheres of influence in certain markets, and their rivals reciprocate, leading to tacit collusion.

Question 15

Price leader

Answer 15

a firm that has a dominant market share and sets “acceptable” prices and margins in the industry.

Question 16

Prisoners’ dilemma:

Answer 16

in game theory, a type of game in which the outcome depends on two parties deciding whether to cooperate or to defect.

Question 17

Tacit collusion:

Answer 17

the result of firms indirectly coordinating actions by signaling their intention to reduce output and maintain pricing above competitive levels.

Question 18

Trust:

Answer 18

another name for a cartel because members have to trust each other to honor agreements.

Question 19

Antitrust policy

Answer 19

government policies designed to combat monopolies and cartels.

Question 20

Antidumping laws

Answer 20

laws intended to protect domestic firms from predatory pricing by foreign competitors.

Question 21

Collusive price setting

Answer 21

price setting by monopolists or collusion parties at a higher than competitive level.

Question 22

Competition policy:

Answer 22

the way in which a company determines the institutional mix of competition and cooperation, which gives rise to the market system.

Question 23

Dumping

Answer 23

an attempt by an exporter to monopolize a market by selling below cost abroad, and then raising prices to eliminate a competitor.

Question 24

Predatory pricing

Answer 24

an attempt to monopolize a market by setting prices below cost and intending to raise prices to cover losses in the long run after eliminating rivals.

Question 25

Resource similarity

Answer 25

is the extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm.

Question 26

Attack

Answer 26

an initial set of actions to gain competitive advantage.

Question 27

Blue ocean strategy

Answer 27

Strategy that avoids attacking core markets defended by rivals which would likely result in a bloody price war or a “red ocean.”

Question 28

Counterattack:

Answer 28

A set of actions in response to an attack.

Question 29

Feint

Answer 29

in competitive dynamics, a firm’s attack on a focal arena important to a competitor but not the attacker’s true target area.

Question 30

Gambit

Answer 30

to withdraw from a low-value market to attract rivals to divert resources into it and then to capture a high-value market.

Question 31

Thrust

Answer 31

the classic frontal attack with brute forces.

Question 32

Contender

Answer 32

strategy: this strategy centers on a firm engaging in rapid learning and then expanding overseas.

Question 33

Defender

Answer 33

strategy: leveraging local assets in areas in which MNEs are weak.

Question 34

Dodger

Answer 34

strategy: this strategy centers on cooperating through joint ventures (JVs) with MNEs and sell-offs to MNEs.

Question 35

Extender

Answer 35

strategy: this strategy centers on leveraging homegrown competencies abroad.

Question 36

Blue ocean strategy focuses on \_\_\_\_\_.

Answer 36

developing new markets