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7 Cards in this Set
- Front
- Back
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What is an Oligopoly?
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A small group of firms in a market with substantial barriers to entry
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What are the 5 features of Oligopoly market structure?
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1) Each firm faces downward sloping demand curves
2)Each firm can set its price p > MC 3) Market failure: too little production (inefficiency) 4) Each firm affects rival firms 5) Firms can sometimes differentiate their product |
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What are the four features of Monopolistic competition?
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1) Small or moderate number of firms
2) Free entry: Π = 0, p = AC 3) Mark-ups offset fixed costs 4) Usually products are differentiated |
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What is closer to monopoly: monopolistic competition or oligopoly?
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Oligopoly
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A set of strategies is a Nash equilibrium if:
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Holding strategies of all players (firms) constant, no player (firm) can obtain a higher payoff (profit) by choosing a different strategy
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What is a dominant strategy?
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A strategy that strictly dominates all other strategies regardless of which actions rivals choose
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Why don't firms cooperate?
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Lack of trust
Each firm can profitably use low-output strategy only if it trusts the other Each firm has a substantial profit incentive to cheat on a collusive agreement |
