Exam 12: Oligopoly and Strategic Behavior

Entry into a market can be deterred by practicing limit pricing.

Recall the Application about low-price guarantees and the prices of tires to answer the following question(s). -Recall the Application.A study of the retail tire market suggests that prices are generally ________ in markets where firms offer low-price guarantees.

Do firms in a perfectly contestable market earn positive economic profit in the long run? Explain.

What is a cartel?

Suppose four firms in the airline industry have gotten together and formed a cartel.Which of the following is true?

A game tree is a graphical representation of the consequences of different actions in a strategic setting.

Recall the Application about advertising in the milk industry to answer the following question(s). -Recall the Application.In the "Got Milk?" advertising campaign,individual milk producers solved the advertisers' dilemma by sharing the costs and benefits of the campaign.

The advertisers' dilemma suggests that firms would be worse off if they did not advertise,even though advertising only raises total output in an industry by only a small amount.

If a firm in a monopolistically competitive market uses advertising to lower the price elasticity of demand for its product,

In a two-person repeated game,a tit-for-tat strategy starts with

A profit-maximizing firm will choose the level of advertisements such that

Table 12.1 -Refer to Table 12.1.The four-firm concentration ratio of the cigarette industry is equal to

12.3 Simultaneous Decision Making and the Payoff Matrix -Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If both firms choose a high-price strategy,

A contestable market has low entry and high exist costs.

If firms A and B do not have dominant strategies,the payoff matrix can be used to predict the Nash equilibrium between firms A and B.

The prisoners' dilemma is a simultaneous decision-making game.

A single firm selling its output in a contestable market will

The prisoners' dilemma shows that the players' dominant strategies often lead them to less than optimal outcomes.Explain the Nash equilibrium and why both prisoners confessing is the Nash equilibrium.

Not practicing limit pricing and allowing entry can hurt an incumbent firm's profits.

Firms participating in implicit price leadership openly discuss their pricing strategies with one another.