Exam 9: Oligopoly and Strategic Behavior

An industry with only three large equally-sized firms would have the same four firm concentration ratio but a higher Herfindahl-Hirshman Index compared to an industry with only four equally sized firms.

If an oligopolist reduces the price of its product:

Whenever any firms in a concentrated industry merge, the four firm concentration ratio ___ and the Herfindahl-Hirschman Index ____:

Bert and Ernie are noncolluding oligopolists. If both choose a high price strategy, each makes $40 in profits; if both choose a low price strategy, each makes $30 in profits. If Bert chooses a high price strategy and Ernie chooses a low price strategy, Bert makes $20 in profits and Ernie makes $60 in profits, while if Bert chooses a low price strategy and Ernie chooses a high price strategy, Bert makes $60 in profits and Ernie makes $20 in profits. Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?

Barriers to entry can be the result of

Whenever the largest firm in a concentrated industry breaks into two equal sized parts, the four firm concentration ratio ___ and the Herfindahl-Hirschman Index ____:

If the four firms in an industry represented 40%, 30%, 20%, and 10% of the market, respectively, what would be the Herfindahl-Hirschman Index for this industry? What if the largest firm then divested into two equal sized companies?

An oligopoly firm cannot know the demand curve it faces unless it knows what its rivals will do in reaction to changes it initiates.

Exhibit The manufacturers of Pepsi and Coca-Cola must each decide whether to launch new ad campaigns to advertise their respective soft drinks. The payoff matrix shows the profits earned from sales of Pepsi and Coca-Cola under alternative advertising scenarios. -Refer to Exhibit. Based on this information, one can say that:

The joint profit maximization solution for a cartel is a attempt to achieve the same result as would a monopolist who owned all the firms in the cartel.

If an oligopolist is naïve, and therefore expect rivals not to respond if it chooses to cut its price,

Whenever any firms in a concentrated industry merge, the four firm concentration ratio:

A unique feature of oligopoly among market models is the presence of differentiated products.

Firms in an oligopoly market tend to be ____ and have ____ barriers to entry.

Which of the following is false?

Oligopoly:

What is a Nash equilibrium? How is it different from a dominant strategy.

Firms in an oligopoly market tend to have strategies that are ____ and have ____ barriers to entry.

A firm could not be engaged in successful predatory pricing if:

Patents, quotas, tariffs, and government licensing can all create barriers to entry into oligopoly industries.