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Chapter 13 Notes

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Department
Economics
Course
ECON 2001.01
Professor
All Professors
Semester
Winter

Description
Chapter 13 Oligopoly: Firms in less competitive markets INTRO ­An industry with only a few firms is an oligopoly  ­In an oligopoly a firms profitability depends on its interactions with other firms ­Firms must develop business strategies ­Oligopoly: A market structure in which a small number of interdependent firms compete ­Game theory can be used to analyze any situation in which groups or individuals interact 13.1 ­One measure of the extent of competition in an industry is the concentration ratio ­Barriers to entry: Anything that keeps new firms from entering an industry in which  firms are earning economic profits ­Economics of scale: The situation when a firm’s long­run average costs fall as it  increases output ­The greater the economies of scale, the smaller the number of firms that will be in that  industry ­Government imposed barriers of entry include patents, licensing requirements, and  barriers to international trade ­Patents: The exclusive right to a product for a period of 20 years from the date the  product is invented ­Occupational licensing 13.2 ­Game theory: The study of how people make decisions in situations in which attaining  their goals depends on their interactions which others; in economics, the study of the  decisions of firms in industries where the profits of each firm depend on its interactions  with other firms ­Business strategy: Actions taken by a firm to achieve a goal, such as maximizing profits ­Games share three characteristics; 1. Rules that determine which actions are allowable 2.  Strategies that players employ to attain their objectives in the game 3. Payoffs that are  results of the interaction among the player’s strategies ­Duopoly: Oligopoly with two firms ­Payoff matrix: A 
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