ECO206 Chapter 15 - Oligopoly and Antitrust Policy

oligopoly

a market structure in which there are only a few firms and firms explicitly take other firms’ likely response into account

strategic decision making

taking explicit account of a rival’s expected response to a decision you are making

cartel

a combination of firms that acts as if it were a single firm; also known as a shared monopoly

cartel model of oligopoly

a model that assumes that oligopolies act as if they were monopolists that have assigned output quotas to individual member firms of the oligopoly so that total output is consistent with joint profit maximization

implicit collusion

when multiple firms make the same pricing decisions even though they have not explicitly consulted with one another

contestable market model

a model of oligopoly in which barriers to entry and exit, not the structure of the market, determine a firm’s price and output decisions

North American Industry Classification System (NAICS)

an industry classification that categorizes industries by type of economic activity and groups firms with like production processes

concentration ratio

the value of sales by the top firms of an industry stated as a percentage of total industry sales

Herfindahl index

an index of market concentration calculated by adding the squared value of the individual market shares of all the firms in the industry

antitrust policy

the government’s policy toward the competitive process

judgment by performance

states that individuals should judge the competitiveness of markets by the performance (behavior) of firms in that market

judgment by structure

states that individuals should judge the competitiveness of markets by the structure of the industry