Managerial Economics and Business Strategy: Oligopoly Models

These flashcards cover key concepts related to oligopoly models in managerial economics, including definitions and characteristics of different types of oligopolies.

Oligopoly

A market structure characterized by a small number of firms, each of which has significant market power and the ability to influence prices.

Duopoly

An oligopoly with only two firms.

Sweezy Oligopoly

A model where firms believe rivals will cut prices in response to their price reduction, but will not raise prices if they increase their prices.

Cournot Oligopoly

An oligopoly model where firms choose output simultaneously, each believing that the rivals will keep their output constant.

Stackelberg Oligopoly

An oligopoly model where one firm (the leader) sets its output first, and the other firms (the followers) react to that output.

Bertrand Oligopoly

An oligopoly model where firms compete on price, leading to prices equating to marginal costs.

Collusion

An agreement among firms in an oligopoly to restrict output and raise prices to increase profits.

Best-Response Function

A function that describes the optimal output for one firm based on the output level of a rival.

Isoprofit Curve

A curve representing all combinations of output levels produced by all firms that yield the same level of profit for a particular firm.

Contestable Market

A market with low barriers to entry, where firms cannot maintain market power over consumers because potential entrants can easily enter and exit the market.