Oligopoly and Game Theory

This set of flashcards covers key concepts related to oligopoly, game theory, and market structures from lecture notes.

Oligopoly

A market structure characterized by a few sellers offering similar or identical products, where firms are interdependent.

Game Theory

The study of how people behave in strategic situations, involving choosing among alternative courses of action while considering others' responses.

Duopoly

A specific type of oligopoly with only two sellers.

Nash Equilibrium

A situation in strategic interactions where each player chooses their best strategy given the strategies of all other players.

Collusion

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

Cartel

A group of firms that coordinate to act like a monopoly, agreeing on production totals and market prices.

Cooperation

Working together in an oligopoly to maximize joint profits, often difficult due to self-interest.

Price Effect

The change in total revenue and profit resulting from an increase in production that lowers market prices.

Dominant Strategy

A strategy that yields the highest payoff for a player, regardless of what other players do.

Predatory Pricing

A strategy where prices are set extremely low to drive competitors out of the market.

Tying

The practice of offering two goods together at a single price to enhance market power.

Herfindahl-Hirschman Index (HHI)

A measure of market concentration calculated by summing the squares of the market shares of all firms in the market.

Perfectly Competitive Firm

A firm that produces at a level where price equals marginal cost, achieving an efficient quantity.