Exam 14: Oligopoly

What is tacit collusion?

What is price leadership?

Explain what the Five Forces Model is useful for and identify each of them.

Assume that we are concerned about the existence of one firm (monopoly) in a market because of the potential for economic profits. If, however, there is free entry and exit, should our concerns change? Why or why not?

What is a perfectly contestable market?

Under what conditions does an oligopoly market result in the same outcome as monopoly? What does this imply for the oligopoly's long-run profits?

When does an oligopoly market result in a cartel? What conditions must be present for the cartel to be successful?

If an adult plays tic-tac-toe with another adult typically the result is that neither player wins. However, when adults play small children they are usually successful in beating them. How is it that there could be Nash equilibrium in the first case and not the second?

What is a maximin strategy?

Define the concentration ratio.

Arguments by regulators are often made that predatory pricing, with its attendant temporary price-cutting below costs, is an attempt to eliminate rivals with the intent of raising prices after the competition has left. Critically evaluate this argument.

What is game theory?

An essential assumption of the Cournot model is that each firm aims to maximize profits, based on the expectation that its own output decision will not have an effect on the decisions of its rivals. Critically evaluate this assumption.