Mankiw 17 - Oligopoly

Oligopoly

A market structure in which only a few sellers offer similar or identical products.

Game Theory

The study of how people behave in strategic situations, especially in competitive markets.

Collusion

An agreement among firms in a market about quantities to produce or prices to charge.

Cartel

A group of firms acting in unison, typically formed to control the market prices and production.

Nash Equilibrium

A situation where 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 that illustrates why cooperation is difficult to maintain even when it is mutually beneficial.

Dominant Strategy

A strategy that is best for a player to follow regardless of the strategies pursued by other players.

Output Effect

The effect on profits from selling one more unit of a good at the current market price.

Price Effect

The effect on profits due to the decrease in price when a firm increases its production.

Anti-trust Laws

Regulations that prevent companies from colluding to raise prices or limit production, ensuring competition.

Predatory Pricing

Pricing a product very low with the intent to eliminate competition.

Resale Price Maintenance

A practice where a manufacturer sets the minimum price at which a product can be sold.

Tying

A practice where a company sells a product only on the condition that the buyer also purchases a different product.

Cooperation

When firms in an oligopoly work together to reach a mutually beneficial outcome.

Self-Interest

The motivation for individuals to act in their own best interests, often leading to a conflict with cooperation.

Quantity Competition

A situation in which firms compete by adjusting their output levels.

Price Competition

A situation in which firms compete by adjusting their prices.

Competing Firms

Firms within a market that offer similar or identical products and are in competition for market share.

Market Outcome

The result of how much of a good is produced and at what price in a specific market structure.