ECON 1116 Chapter Notes - Chapter 17: Arms Control, Clayton Antitrust Act, Price Fixing
16 Nov 2016
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Document Summary
Oligopoly- a few sellers the actions of any one seller can have a large impact on the profits of all other sellers. Few firms, difficult entry (usually because large capital reqs), product is either differentiated (autos) or homogeneous (oil) Game theory- study of how people behave in strategic situations when choosing among alternative courses of action, must consider how others might respond to the action she takes. Profit depends on how much a firm produces and also how much the other firms produce. Oligopolists are best off when they cooperate and act like a monopolist producing small. Monopoly= 60 gal, each because profit maximizing. If duopoly gets together and agrees on production and price, collusion the group of firm acting in unison is called a cartel monopoly outcome! Antitrust laws prohibit explicit agreements among oligopolists. In absence of binding agreement, monopoly outcome is unlikely.
