Exam 14: Oligopoly: Firms in Less Competitive Markets

Table 14-8 Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. -Refer to Table 14-8.If the two firms collude, is there an incentive for either to cheat on the collusion agreement?

All of the following are examples of oligopolistic markets except

Figure 14-2 The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed Internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (DSL). Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game. -Refer to Figure 14-2.Now suppose that the government delays Xenophone's entry and Gigacom moves first, what is the likely outcome in the market?

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

The approach economists use to analyze competition among oligopolists is called

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

According to the textbook, of all barriers to entry, the most important are those that are due to

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry, some economists prefer another measure of competition, the Herfindahl-Hirschman Index.

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries, but not for oligopoly firms.The reason for this is

Figure 14-8 -Refer to Figure 14-8 Use the decision tree to determine whether Microsoft should deter Toshiba from entering the market for ergonomic wireless keyboards.Assume that each firm must earn a 20% return on investment to break even.Explain Microsoft's decision process.

Which government agency publishes four-firm concentration ratios?

What is a sequential game? How are decision trees used to analyze sequential games?

Figure 14-2 The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed Internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (DSL). Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game. -Refer to Figure 14-2.If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Xenophone provides cable service a credible threat?

On January 2, 1971, all cigarette advertising was banned on U.S.television and radio stations.Assuming that advertising is a prisoner's dilemma, and that if one company advertises, its competitors will also choose to spend money to advertise, did this ban likely increase or decrease the profits of cigarette companies in 1971? Briefly explain.

Table 14-3 Suppose OPEC has only two producers, Saudi Arabia and Ecuador. Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Ecuador. The payoff matrix in Table 14-3 shows the profits earned per day by each country. "Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota. -Refer to Table 14-3.What is the Nash equilibrium in this game?

The DeBeers Company of South Africa was able to block competition through

When large firms in oligopolies cut their prices,

OPEC periodically meets to agree to restrict the cartel's oil output, and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Who won a Nobel Prize in economics for his work in the development of game theory?