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19 terms

Oligopoly and Strategic Behavior

STUDY
PLAY
A(n) _____ is a market dominated by a few large producers of a homogeneous or differentiated product.
Oligopoly
Firms in oligopolistic industries are "price makers" because:
They are few in numbers
Oligopolies are comprised of:
A few large producers
_____ means illegal cooperation with rivals.
Collusion
What is not a characteristic of oligopoly?
Firms have no control over their price.
Oligopolies must consider the possible reaction of rivals to its own _____, _____ and _____ decisions.
Pricing/output/advertising
What characteristics made the American auto industry into a differentiated oligopoly for nearly a century?
Entry barriers into the auto manufacturing industry/ Mergers to help gain economies of scale/ the mutual interdependence of each firms profitability/the strategic behavior of competitors
The study of how people behave in strategic situations is called _____ _____:
Game theory
Barriers to entry exist for monopolies as well as oligopolies due to all of the following except:
Diseconomies of scale.
When firms in an oligopoly _____, their payoffs will be greater than if they did not.
Collude
True or false: firms in an oligopoly always produce a homogeneous product.
False
By changing their advertising and _____ strategies, firms competing in an oligopoly can affect profits and influence the profits of rivals.
Pricing
Why would a firm deviate from a collusive outcome as resented in the payoff matrix?
To increase its profit
An _____ is present when the largest four firms in an industry control more than 40% or more of the market.
Oligopoly
A situation where firms meet to fix prices, divide markets, or restrict competition is called:
Collusion
Compared to monopolies, oligopolies:
May give the appearance of competition but are acting like monopolies.
Oligopolies have:
Similar entry barriers to monopolies.
Oligopolistic firms do what when they change their pricing strategies?
Affect profits and influence the profits of rival firms.
Compared to pure competition, oligopolistic industries may result in
More technological advances because oligopoly firms earn economic profits to fund research and development/More technological advances because oligopolies have assurances of rewards caused by barriers to entry.