Monopolistic Competition, Oligopoly, and Game Theory

Flashcards covering key concepts related to monopolistic competition, oligopoly, and game theory.

Monopolistic Competition

A market structure characterized by many firms selling similar but not identical products, where each firm has some control over price due to product differentiation.

Product Differentiation

The process of distinguishing a product from others in the market to make it more attractive to specific target markets.

Oligopoly

A market structure dominated by a small number of large firms, leading to mutual interdependence and significant barriers to entry.

Cartel

An agreement between firms to collude on price and output to maximize collective profits.

Nash Equilibrium

A situation in a game where players have chosen strategies and no player can benefit by changing their strategy while the other players keep theirs unchanged.

Prisoner’s Dilemma

A scenario in noncooperative games where the Nash equilibrium outcome is inferior to a potential cooperative outcome.

Trigger Strategies

Strategies in repeated games that respond to the other player's past actions, which can include permanent retaliation or forgiveness of mistakes.

Dominant Strategy

A strategy that is best for a player regardless of what the other players choose.

Sequential-Move Games

Games where players make their moves one after another in a sequence rather than simultaneously.

Simultaneous-Move Games

Games where players make their moves at the same time, without knowledge of the other players' actions.

Mutual Interdependence

A situation in oligopoly where the actions of one firm affect and are affected by the actions of other firms in the market.

Long-run Economic Profit

A profit that remains consistently over time in the long run, typically not achievable in monopolistic competition due to market entry.

Informational Advertising

Advertising that provides factual information about a product and reduces consumer search costs.

Persuasive Advertising

Advertising that aims to influence consumer emotions and preferences, potentially raising the product's price.