Exam 15: Oligopoly

The Sherman Act

-The above payoff matrix shows the economic profits (in millions of dollars) of two firms in a duopoly that have agreed to a cartel agreement to restrict their output and set their prices equal to the monopoly price. Assuming the game is played once, the equilibrium outcome is where

In a duopoly game we observe the following payouts: if the two firms collude they will each earn $50,000. If one firm cheats then he earns $60,000 and the other firm earns -$10,000. If both firms cheat then they each earn zero economic profit. In this game what is the Nash equilibrium?

What is resale price maintenance? Is resale price maintenance legal in the United States?

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

The EU's antitrust chief in November 2008 fined car glass producers Asahi, Pilkington, Saint-Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price-fixing, the largest sum ever levied by the EU for a cartel. What is the reason why Asahi, Pilkington, Saint-Gobain and Soliver would price fix?

Two firms, Alpha and Beta, produce identical computer hard drives. They have identical costs, and the hard drives they produce are identical. The industry is a natural duopoly. Alpha and Beta enter into a collusive agreement, according to which they split the market equally. If both firms comply with the agreement

"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?

Collusive agreements tend to break apart because the incentive to cheat is so great.

What market structures other than oligopoly have the characteristic of one firm's actions affecting the actions of its competitors? Explain your answer.

In what type of market is a cartel possible?

Adkins Air is the only seller offering service directly from Milwaukee to Greensboro. The market is contestable. Thus the Nash Equilibrium for a game between Adkins Air and a potential entrant is when the potential entrant

-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

-For a Nash equilibrium to be possible, all players must

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 iPhone no longer comes pre-loaded with Google Maps but instead has the Apple map application pre-loaded. Regulators might be concerned with this requirement because they might see it as an example of

Game theory is distinctive in that its elements are

In a sequential contestable market game

"Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Suppose that all pizza companies have the same costs and the minimum average total cost is $12 per pizza. The pizza companies have an efficient scale of 100 pies per night. In the small town of Coatsville, at the price of $12 per pizza the quantity demanded is approximately 300 pizzas per night. This market, therefore, can best be characterized as