Exam 15: Oligopoly

Consider a market in which each firm must predict the price and quantity decisions of other firms, as well as how those price and quantity decisions will affect the first firm's revenue and profit. This market is best described as

In a cartel

If firms in an industry differentiated their products and made economic profits in the short-run, what other characteristic would be important to determine if this is an oligopoly or a monopolistically competitive market?

Kellogg's and General Mills are two of the dominant breakfast cereal manufactures in the U.S. Each firm can either sign or not sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. Both Kellogg's and General Mills have signed athletes in 2008, Michael Phelps and Nastia Liukin, respectively. What does this suggest about the outcome of the oligopoly game?

Game theory is a tool for studying

If price fixing by competitors is necessary because without it a firm will go bankrupt, is the price fixing legal?

A market in which the Herfindahl-Hirschman Index is 1,000 is regarded by the Federal Trade Commission as

The Hirschman-Herfindahl index (HHI) in an industry is 50. A merger is proposed that will raise the HHI to 100. In this case, the

A collusive agreement between two duopolists is similar to the prisoners' dilemma because in both games

-There are two can companies, American and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If both firms cheat on the collusive agreement, what amount of economic profit is made by American?

The sum of the squares of the market share for the fifty largest firms in a market is the basis of the government's current merger guidelines.

-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 gives the economic profit that each firm can make. If Felix cheats on the agreement but Oscar complies, Felix makes an economic profit of ________ and Oscar makes an economic profit of ________.

-The table above shows the payoff matrix for a prisoners' dilemma. In the Nash equilibrium

In a duopoly with a collusive agreement and in a one-time only game, a firm's profit is largest if it ________ the agreement and if the other firm ________ the agreement.

Antitrust laws attempt to

A duopoly occurs when

If Sony required all its retailers not to sell televisions from other companies, Sony would be engaging in what kind of activity? Is Sony's requirement legal or does it violate the Clayton Act?

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. What is the Herfindahl-Hirschman index in this industry?

-Ann Taylor and Gap are two clothing companies that must decide on the leading color palette for next season. Their sales depend on the choice of color they make as well as the choice their competitor makes. Their sales are summarized in the payoff matrix above. Using the payoff matrix

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1945 and two of the competing banks have considered merging. Because the merger would raise the HHI by 155 points, the Federal Trade Commission would likely