CH 10

Cartel, cheating, nash equilibrium, prisoner’s dilemma, and cooperation

Oligopoly Characteristics:

• Relatiively new firms

• MUTUAL interdependence

• Substantial barriers to market entry

• Shared market power and considerable control over price

• Potential for long-run economic profit

Competition on:
Price

Quantity → Choosing Manufacturer size

Case Study:
A Parable of Duopoly

Cartel - group of competing firms that explicitly agree to restrict overall production output, choke supply, and artificially force market prices to monopoly levels.

Cartels are usually unstable

Legal Barrier: Sherman Antiturst Act of 1890 (US) and Article 101 (EU), explicit price fixing is a per se violation. No legal excuse exists.

Penalties: are up to $100M in corporate fines, 10 yrs federal prison for executives.

Zrozum to ^^^