Oligopoly Flashcards

This set of flashcards covers important vocabulary and concepts related to oligopoly markets, including their characteristics, strategic decision making, and market behavior.

Oligopoly

A market structure where a few large firms dominate the market.

Few Firms

Only a limited number of firms control most of the market.

High Barriers to Entry

Significant obstacles that make it difficult for new firms to enter the market.

Interdependence

Firms must consider how competitors will react to their decisions.

Game Theory

A study of strategic decision making where firms consider their own strategy and their competitors’ strategies.

Payoff Matrix

A tool that shows possible outcomes for firms based on different decisions.

Kinked Demand Curve

A concept explaining why firms in an oligopoly expect different reactions from competitors depending on price changes.

Demand becomes elastic

When a firm raises prices, competitors do not follow, causing customers to switch.

Demand becomes inelastic

When a firm lowers prices, competitors also lower prices, leading to reduced profits for all.

Prices in oligopoly markets

Tend to be stable and do not change often due to interdependence of firms.