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18 terms

chapter 17

STUDY
PLAY
concentration ratio
the percentage of the market's total output supplied by its four largest firms
oligopoly
a market structure in which only a few sellers offer similar or identical products
game theory
the study of how people behave in strategic situations
duopoly
an oligopoly with two firms
collision
an agreement among firms in a market about quantities to produce or prices to charge
cartel
a group of firms acting in unison
nash equilibrium
a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen
output effect
If P > MC, selling more output raises profits
price effect
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
dominant strategy
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
prisoner's dilemma
a "game" between two captured criminals that illustrates why cooperation is difficult even when it is mutually beneficial
prisoner's dilemma example
-ad wars
-organization of petroleum exporting countries
-arms race between military superpowers
-common resources
tit-for-tat
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
controversies
-resale price maintenance "fair trade"
-predatory pricing
-tying