Oligopoly Flashcards

Flashcards for reviewing Oligopoly lecture notes.

Oligopoly

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

Concentration Ratio

The percentage of the market’s total output supplied by its four largest firms, used to characterize oligopolies.

Strategic Behavior

A firm's decisions about price or quantity can affect other firms and cause them to react. The firm will consider these reactions when making decisions.

Game Theory

The study of how people behave in strategic situations, relevant to understanding oligopoly behavior.

Duopoly

An oligopoly with only two firms.

Collusion

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

Cartel

A group of firms that gets together and makes joint decisions on price and/or output to maximize joint profits.

Nash Equilibrium

A situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen.

Dominant Strategy

A strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Prisoners’ Dilemma

A “game” between two captured criminals that illustrates why cooperation is difficult even when it is mutually beneficial.

Tit-for-tat

A strategy where whatever your rival does in one round (whether renege or cooperate), you do in the following round.