Exam 15: Oligopoly

Economies of scale and limited demand can form a natural barrier to entry that can create a natural oligopoly.

Bob -The table above displays the possible outcomes for Bob and Joe, who have been arrested for armed robbery and car theft. Which of the following is true?

Market share in the Widget industry -In the table above, the Herfindahl-Hirschman Index in the widget industry is

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 2175 and two of the competing banks have considered merging. Because the merger would raise the HHI by 25 points, the Federal Trade Commission would likely

Nimbus, Inc., and Cleansweep, Inc., are the only producers of flying brooms. Each firm has two strategies: Spend 30,000 galleons a year on research and development (R&D) or spend nothing on R&D. If neither firm spends on R&D, Nimbus' economic profit is 80, 000 galleons and Cleansweep's economic profit is 40,000 galleons. If each firm conducts R&D, market shares are maintained, but each firm's profit is lower by the amount spent on R&D. If Nimbus conducts R&D and Cleansweep does not, Nimbus makes an economic profit of 120,000 galleons, while Cleansweep incurs an economic loss of 20,000 galleons. If Cleansweep conducts R&D and Nimbus does not, Cleansweep makes a profit of 60,000 galleons while Nimbus loses 10,000 galleons. a) Construct a payoff matrix for the game that Nimbus and Cleansweep must play. b) Find the Nash equilibrium. In the Nash equilibrium, what is each firm's equilibrium profit? c) What is the cooperative outcome? Would the firms make more economic profit if they collude to achieve the cooperative outcome?

Game theory is a tool for studying competitive behavior between firms in monopolistic competition because of the mutual interdependence among the firms.

Why do most collusive agreements have difficulty surviving?

As the Federal Trade Commission currently interprets the Herfindahl-Hirschman index (HHI), an industry is considered to be moderately concentrated if the HHI value is

The first antitrust law passed was the ________.

What is a natural oligopoly? How does it arise? Give an example.

Ann and Lynn have been arrested by the police, who have evidence that will convict them of robbing a bank. If convicted, each will receive a sentence of 6 years for the robbery. During questioning, the police suspect that Ann and Lynn are responsible for a series of bank robberies. If both confess to the series, each will receive 12 years in jail. If only one confesses, she will receive 4 years and the one who does not confess will receive 14 years. What is the equilibrium for this game?

A market structure in which a small number of firms compete is called ________.

A contestable market is one in which

A cartel usually has a collusive agreement to

The prisoners' dilemma describes a single-play game that features

An equilibrium in game theory in which the players make and share the monopoly profit is called

In a prisoner's dilemma, the Nash equilibrium occurs where

For a Nash equilibrium to be possible, all players must ________.

In a collusive agreement between two duopolists in an oligopoly, each firm has an incentive to cheat on the agreement because the firm's price

Disney -Disney and Fox must decide when to release their next films. The revenues received by each studio depend in part on when the other studio releases its film. Each studio can release its film at Thanksgiving or at Christmas. The revenues received by each studio, in millions of dollars, are depicted in the payoff matrix above. Which of the following statements correctly describes Fox's strategy given what Disney's release choice may be?