Exam 15: Oligopoly

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium

Suppose that two clothing manufacturers, Frederick's Fashions and Stephan's Styles, announce that they plan to merge. The Herfindahl-Hirschman index is currently 1,500. After the merger, the HHI will rise to 1,560. This market is

Sarah's Soothing Diapers, Inc. and Orville's Odorless Diapers, Inc. are duopolists, who have agreed to collude. Orville has decided that he will comply with the collusive agreement as long as Sarah cooperated in the previous period. But if Sarah cheated in the previous period, Orville will punish Sarah by cheating in the current period. Orville's strategy is referred to as a

The Sherman Act makes it illegal to

When is price fixing among competitors not a violation of the antitrust laws?

Why do firms in an oligopoly find it difficult to cooperate and not cheat on a cartel agreement?

A collusive agreement between two duopolists is similar to the prisoners' dilemma because in both games

Cartels are typically subject to cheating by their members because

Which of the following is always a violation of the antitrust law?

Oscar -Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above shows the economic profit that each firm can make. If the game is played only once, then ________.

Which of the following business practices, if proven to exist, is always illegal under U.S. antitrust law?

Russia, Iran and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel on natural gas. What is the goal of a cartel?

The distinguishing features of oligopoly are ________ and a ________ in the industry.

Suppose that two soft drink manufacturers, Fizzy Pop and Spritzy Soda, agree to charge the same prices for their soft drinks. This practice is

Suppose two firms are trying to decide how much to budget for research and development. Once a new discovery is made, each firm benefits regardless of which firm developed the innovation. In this R&D game of chicken, the Nash equilibrium will be that

Firm 1 -Two software firms have developed an identical new software application. They are debating whether to give the new app away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1's best strategy?

When only a small number of producers compete with each other is a defining characteristic of

In a contestable market

The small town of Narberth has two pizza stores. Which of the following statements are CORRECT? I. The profits of each store depend on the price of the pizza at the other store. II) Both stores would increase their profit if they cooperated in setting their prices.

In 2008, a former Intel engineer has been charged with stealing trade secrets worth $1 billion. Intel owns 90 percent of the worldwide market for microprocessors, AMD has the rest. Conducting R&D is very expensive so suppose that each of these firms can either steal R&D or develop their own R&D. If both firms develop their own R&D, economic profit will be $50 million each. If one company steals R&D, that firm earns $100 million in economic profit while the other firm earns $10 million. If both firms steal R&D, each firm breaks even. What is NOT true about this game?