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9 Cards in this Set
- Front
- Back
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oligopolistic industry
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few BIG BUSINESSES controlling the industry
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effect of few firms in an industry
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interdependence --> whatever one firm does directly affects all the other firms in the industry
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barriers to entry in an oligopolistic competition
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large start-up costs and behavior of oligopolists
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reason for the kinked demand curve in a noncollusive model
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assymetry in response to a change in price; two demand curves with two different elasticities
below the kink - everybody lowers the price above the kink - nobody wants to raise the price |
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define: tacit collusion/quiet collusion
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if the price leader raises the price, all the firms in the industry match the price leader's higher price
--> DO NOT DISCUSS price change |
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define: overt collusion
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firms get together and discuss output and prices
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one thing that cartel and monopolies do similarly
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cut output and raise prices
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one major flaw of the cartel system
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free riders --> letting others cut output, for newly formed members can take advantage of the higher price
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define: Nash equilibrium
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also called the maximin solution; outcome is close to a competitive outcome - price is relatively low and profits are relatively low.
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