Exam 15: Oligopoly

In the market for bottled water, Fresh Springs has a 30 percent share of the market, Swiss Springs has a 27 percent share, L'eau de France has a 13 percent share, and Mountain Water has a 10 percent share. The rest of the market consists of 20 firms with a 1 percent share of the market each. What is the value of the Herfindahl-Hirschman index?

Which group of features is shared by all games?

How is a contestable market similar to a perfectly competitive one?

In the prisoners' dilemma game, each player

If there is a collusive agreement in a duopoly to maximize profit, then the price will

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1575 and two of the competing banks have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium, Dell's profit is ________ million and Gateway's profit is ________ million.

Russia and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel on natural gas. The two strategies these countries face are to comply with the cartel agreement or to cheat on the cartel agreement. If all countries comply, the economic profit for both will be $140 million. If one country cheats, that country earns $200 million in economic profit and the other country has an economic loss of $10 million. If all countries cheat, they break even. What is the the likely outcome of this game if it is repeated as a tit-for-tat game?

There are twenty five dealers in the local market for new cars. The largest dealership has a market share of 12 percent; the second and third largest have 10 percent and 9 percent, respectively; the fourth and fifth largest have 5 percent and 4 percent, respectively; and the remaining twenty dealerships each have a 2 percent market share. If the second largest dealership merged with the fifth largest, that would increase the Herfindahl-Hirschman index (HHI) by

Suppose two firms, FastNet and SmartCast are the only fast Internet providers in a city. They have identical costs and one firm's service is a perfect substitute for the other's. The industry is a natural duopoly. Suppose that FastNet and SmartCast collude and agree to share the market equally. -In the scenario above, in Nash equilibrium:

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

Antitrust laws attempt to

Firm 1 -Two software firms have developed an identical new software application. They are debating whether to give the new application away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1's best strategy?

Limit pricing refers to

In game theory, a Nash equilibrium is the equilibrium that always yields the best result.

Oscar -Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above shows the economic profit that each firm can make. If the game is played only once, then ________.

One difference between oligopoly and monopolistic competition is that

"If firms in an oligopoly enter into a collusive agreement to operate as a monopoly, the industry produces the most output and if they operate as perfect competitors, the industry produces the least output." Is the previous statement correct or incorrect? Why?

Firm 1 -Two software firms have developed an identical new software application. They are debating whether to give the new application away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is the Nash equilibrium of the game?

Is collusion possible in monopolistic competition? Why or why not?