Introduction to Strategic Behavior

Flashcards covering key concepts from the lecture on Strategic Behavior.

Non-Price Competition

Competition that focuses on factors other than price to influence consumer decisions and outcomes in an oligopoly.

Commitment

A credible promise or threat that can affect strategic interactions; noncredible threats are not in an agent’s self-interest to carry through.

Direct Effect of Strategic Move

When a strategic move directly alters the choices or payoffs of rivals.

Indirect Effect of Strategic Move

When a strategic move changes the behavior of rivals through altering their expectations.

Strategic Choices vs. Tactical Choices

Strategic choices are long-term and involve commitment, while tactical choices are short-term and can be reversed quickly.

Stackelberg Model

A leader-follower model where the leader commits to its quantity before the follower decides how much to produce.

First-Mover Advantage

The strategic advantage gained by being the first to enter a market or make a decision, leading to potentially greater profits.

Limit Output

The minimum output required by an incumbent to prevent entrants from making nonpositive profits.

Stylos Postulate

The assumption that an entrant believes the incumbent will produce the same amount post-entry as it did pre-entry, potentially allowing for limit pricing.

Limit Pricing

A strategy to deter entry by producing at the limit output level to make entry unprofitable.