Principles of Microeconomics: Oligopoly

These flashcards cover key vocabulary and concepts related to oligopoly and market structures, essential for understanding microeconomic principles.

Oligopoly

A form of industry structure characterized by a few dominant firms with the ability to influence prices.

Concentration Ratio

The share of industry output or sales accounted for by the top firms in an industry.

Collusion

An agreement among firms in an oligopoly to set prices or output levels to maximize joint profits.

Cartel

A group of firms that collaborates to make joint price and output decisions.

Tacit Collusion

Collusion that occurs implicitly rather than through explicit agreements.

Game Theory

A framework for analyzing strategic interactions among rational decision-makers.

Nash Equilibrium

A situation where players in a game choose strategies that are optimal given the strategies chosen by others.

Price Leadership

A situation in an oligopoly where one firm sets the price and others follow.

Duopoly

A market structure where only two firms dominate the industry.

Prisoners' Dilemma

A situation in game theory where individuals acting in their own self-interest lead to a worse outcome.

Five Forces Model

A model that analyzes the competitive forces within an industry to determine its profitability.

Contestable Markets

Markets in which the threat of entry by new firms keeps prices at competitive levels.

Dynamic Pricing

A pricing strategy where prices are adjusted based on demand and other factors.

Maximin Strategy

A strategy chosen to maximize the minimum gain that can be earned.

HHI

An index of market concentration calculated by summing the squares of the percentage shares of firms in the market.