ECON 1050 Lecture : Characteristics of Oligopoly

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silverchimpanzee502

2 Apr 2012

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Game theory strategic decisions antitrust laws and oligopoly regulation. Duopoly: market in which only two firms compete; two firms can meet the demand at the lowest possible price (min. Atc) firms are interdependent and therefore face temptation to cooperate interdependence: each firm"s profit depends on every firm"s actions: cartel: illegal group of firms acting together to limit output, raise price, and increase profit, often break down. Oligopoly models: the kinked demand curve model each firm believes that: Mr curve is broken at the current quantity. Goes against firm"s belief that p will not cause others to follow: profit is not maximized as firm has based actions on wrong. The beliefs that generate the kinked demand curve are not always correct and firms can figure out this. If mc increases enough, all firms raise their prices and the kink vanishes. A firm that bases its actions on wrong beliefs doesn"t maximize profit. beliefs: dominant firm oligopoly.

Related Questions

1. Which of the following statements about oligopolies is not correct?

a.		Oligopolistic firms always charge the monopoly price.
b.		Oligopolistic firms are interdependent in a way that firms in perfect competition are not.
c.		An oligopolistic market has only a few sellers.
d.		The actions of any one seller can have a large impact on the profits of all other sellers.

2. Which is true of an oligopoly market that reaches a Nash equilibrium?

a.		The firms will not have behaved as profit maximizers.
b.		A firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
c.		A firm will not take into account the strategies of competing firms.
d.		The market price will be different for each firm.

3. In game theory, what is a dominant strategy?

a.		the best strategy for a player to follow, regardless of the what strategies other players use
b.		a strategy that makes every player better off
c.		a strategy that must appear in every game
d.		the best strategy for a player to follow only if other players are cooperative

4. Which of the following situations produces the largest profits for oligopolists?

a.		The firms reach a Nash equilibrium.
b.		The firms combine to produce the monopoly output level.
c.		The firms set prices equal to marginal cost.
d.		The firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome.

1. Which of the following statements about oligopolies is not correct?

a.		Oligopolistic firms always charge the monopoly price.
b.		Oligopolistic firms are interdependent in a way that firms in perfect competition are not.
c.		An oligopolistic market has only a few sellers.
d.		The actions of any one seller can have a large impact on the profits of all other sellers.

2. Which is true of an oligopoly market that reaches a Nash equilibrium?

a.		The firms will not have behaved as profit maximizers.
b.		A firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
c.		A firm will not take into account the strategies of competing firms.
d.		The market price will be different for each firm.

3. In game theory, what is a dominant strategy?

a.		the best strategy for a player to follow, regardless of the what strategies other players use
b.		a strategy that makes every player better off
c.		a strategy that must appear in every game
d.		the best strategy for a player to follow only if other players are cooperative

4. Which of the following situations produces the largest profits for oligopolists?

a.		The firms reach a Nash equilibrium.
b.		The firms combine to produce the monopoly output level.
c.		The firms set prices equal to marginal cost.
d.		The firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome.

The mutual interdependence that characterizes oligopoly arises because:

a. The products of various firms are homogeneous

b. The products of various firms are differentiated

c. Each firm in an oligopoly depends on its own pricing strategy and that of its rivals

d. The demand curves of firms are kinked at the prevailing price

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ECON 1050 Lecture : Characteristics of Oligopoly

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