U9.2-Oligopoly

in oligopoly, how many firms have dominance?

small amount of firms

examples of oligopoly

soft drink, airlines, cell phone companies

in an oligopoly, firms are

highly interdependent and affected by each other's actions

firms commonly ____ in an oligopoly

collude

there are high

barriers to entry for an oligopoly

game theory

study of how people and firms act strategically

dominant strategy in game theory

best choice regardless of what the other chooses

graph of game theory

2x2 square, everything on the left (in squares and table) corresponds to firm on left, everything else corresponds to the right

nash equilibrium

when both sides voluntarily choose a square and have no incentive to move

prisoner's dilemna

nash equilibrium results in worse than optimal result for both firms

how to show subsidy on payoff matrix?

add subsidy to result when one firm or both firms perform action that triggers subsidy (example: if only A chooses west, only add subsidy to A, if both choose west then add to both's payoff)