Exam 14: Oligopoly: Firms in Less Competitive Markets

Collusion occurs when

Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.

An oligopoly between two firms is called

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, what is the likely outcome in the market?

A characteristic found only in oligopolies is

Producing a differentiated product occurs in which of the following industries?

Collusion is common in oligopoly and monopolistically competitive industries.

In 1976 New Jersey voters passed a referendum to legalize gambling.Several gambling casinos opened in Atlantic City beginning in 1978 and were initially very profitable, attracting people from the Mid-Atlantic and Northeastern states.Entrepreneurs in these states were unable to compete with the Atlantic City casinos because casino gambling was illegal in their states.For these entrepreneurs in the other states, the barrier to entry they were facing was

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

Figure 14-3 Rainbow Writer (RW)is a small online company selling a highly rated software package for engraving words onto objects produced by 3D printers.The firm currently earns a profit of $2 million per year selling its package exclusively on its Website.Odeon, the producer of the most popular 3D printers has expressed interest in bundling Rainbow Writer's product with its printers.Odeon expects that bundling would further boost its sales and allow it to sell its printers at a higher price, thus raising its profits beyond its current profit of $12 million.Figure 14.3 shows the decision tree for the Rainbow Writer-Odeon bargaining game. -Refer to Figure 14-3.How will Rainbow Writer respond to Odeon's two possible offers?

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?

Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.

Which of the following statements is generally true?

On November 7, 1996, the Distilled Spirits Council of the United States decided to end its voluntary ban on television and radio liquor advertisement.The ban on hard liquor advertising had been in effect since 1936 for radio and 1948 for television.Did the lifting of this ban likely increase or decrease the profits of hard liquor companies? Briefly explain.

Producing a homogeneous product occurs in which of the following industries?

Economies of scale can lead to an oligopolistic market structure because

Which of the following is the best example of an oligopolistic industry?

Table 14-4 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising budget to compete for customers.If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit.Table 14-4 shows the payoff matrix for this advertising game. -Refer to Table 14-4.Does Alistair have a dominant strategy and if so, what is it?

If economies of scale are relatively important in an industry, the typical firm's