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What is 1 + 3?
the percentage of the market's total output supplied by its four largest firms
a market structure in which only a few sellers offer similar or identical products
the study of how people behave in strategic situations
an oligopoly with two firms
an agreement among firms in a market about quantities to produce or prices to charge
a group of firms acting in unison
a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen
If P > MC, selling more output raises profits
Raising production increases market quantity, which reduces market price and reduces profit on all units sold
output effect > price effect
the firm increases production
price effect > output effect
the firm reduces production
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
a "game" between two captured criminals that illustrates why cooperation is difficult even when it is mutually beneficial
prisoner's dilemma example
-organization of petroleum exporting countries
-arms race between military superpowers
whatever your rival does in one round (whether renege or cooperate), you do in the following round
sherman antitrust act
forbids collusion between competitors
clayton antitrust act
strengthened rights of individuals damaged by anticompetitive arrangements between firms
-resale price maintenance "fair trade"