Exam 15: Oligopoly

A firm might be tempted to cheat on a collusive price-fixing agreement by setting a ________ price and producing ________ than agreed upon.

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. What is the Herfindahl-Hirschman index in this industry?

Explain what a cartel is and the difficulties faced in maintaining a cartel.

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?

In the prisoners' dilemma game, when each player takes the best possible action given the action of the other player, ________.

In a market with a Herfindahl-Hirschman Index of 2,000, according to their guidelines will the Department of Justice challenge a merger that would increase the index by 100?

The Clayton Act of 1914 was passed to prohibit, in part

A law that prohibits certain kinds of market behavior such as monopoly and monopolistic practices is called ________.

"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?

Player A -The table above shows the payoff matrix for a prisoners' dilemma. In the Nash equilibrium

The Sherman Act

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 are the economic justifications of making price fixing illegal?

The sum of the squares of the market share for the fifty largest firms in a market is the basis of the government's current merger guidelines.

Economies of scale and limited demand can form a natural barrier to entry that can create a natural oligopoly.

In the scenario above, which of the following actions will maximize the industry's economic profit?

Ann and Lynn have been arrested by the police, who have evidence that will convict them of robbing a bank. If convicted, each will receive a sentence of 6 years for the robbery. During questioning, the police suspect that Ann and Lynn are responsible for a series of bank robberies. If both confess to the series, each will receive 12 years in jail. If only one confesses, she will receive 4 years and the one who does not confess will receive 14 years. What is the equilibrium for this game?

Limit pricing is a strategy which is intended to deter entry into an industry.

What is a Nash equilibrium? Is this equilibrium necessarily the best outcome for the players? Give an example.

In a contestable market with one firm in the market, the existing firm will

-The Herfindahl-Hirschman Index is used as a guideline to determine if a market is competitive or concentrated. Calculate the index value for each market described below. a) 100 firms, each of which produces 1 per cent of market output b) 50 firms, each of which produces 2 per cent of market output c) 25 firms, each of which produces 4 per cent of market output d) 20 firms, each of which produces 5 per cent of market output e) 10 firms, each of which produces 10 per cent of market output f) 5 firms, each of which produces 20 per cent of market output g) 2 firms, each of which produces 50 per cent of market output