Exam 14: Oligopoly: Firms in Less Competitive Markets

Game theory was developed in the 1940s by John von Neuman,a mathematician,and an economist named

The five competitive forces model was developed by

An oligopolist's demand curve is

The Organization of Petroleum Exporting Countries (OPEC)controls about 75 percent of the world's proven oil reserves.Economists refer to OPEC as a cartel because

Table 14-5 Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby. Both consider offering free pickup and delivery services. Table 14-5 shows the payoff matrix containing the expected quarterly profits for each firm. -Refer to Table 14-5.Does Henri have a dominant strategy? If yes,what is it?

A key part of Microsoft's business strategy in the video game console market has been

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

An oligopolistic industry is characterized by a few large firms acting independently.

The prisoner's dilemma illustrates

Sequential games are often used to analyze which two types of business strategies?

One reason why,in the last four decades,the number of new auto makers in the world has been very small compared to the past is that

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

Table 14-1 Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 14-1 shows the payoff matrix for this advertising game. -Refer to Table 14-1.Is there a dominant strategy for Godrickporter and if so,what is it?

Table 14-10 -Refer to Table 14-10.Suppose the payoff matrix in the above figure represents the payoffs to Saudi Arabia and Yemen for the production of oil.Saudi Arabia and Yemen must decide how much oil to produce.Since the demand for oil is inelastic,relatively low production rates drive up prices and profits.Saudi Arabia,the world's largest and lowest cost producer,is able to influence market price; it has an incentive to keep output low.Yemen,on the other hand,is a relatively high cost producer with much smaller reserves.Assume Saudi Arabia now decides to try to further influence the oil market by offering to pay Yemen $25 million to produce a low output. a.Create a new payoff matrix that reflects Saudi Arabia's willingness to pay Yemen $25 million to produce a low output. b.What is the dominant strategy for each country in this new game? c.What is the new Nash equilibrium?

If economies of scale are relatively unimportant in an industry,the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a ________ fraction of total industry sales.The industry will be ________.

Collusion between two firms occurs when

Figure 14-4 Rainbow Writer (RW) is a small online company selling a highly rated software package for printing color labels directly onto CDs. The firm currently earns a profit of $2 million per year selling its package exclusively on its Web site. Odeon, the producer of the most popular software package for editing and burning CDs and DVDs, has expressed interest in bundling Rainbow Writer's product into its own package. Odeon expects that bundling would further boost its sales and allow it to sell the new bundled product at a higher price, thus raising its profits beyond its current profit of $12 million. Figure 14-4 shows the decision tree for the Rainbow Writer-Odeon bargaining game. -Refer to Figure 14-4.In a real world situation involving Rainbow Writer and Odeon,what scenario below might permit Rainbow Writer to rationally refuse an offer from Odeon of $40 per copy of the software package?

Table 14-9 -Refer to Table 14-9.Saudi Arabia and Yemen must decide how much oil to produce.Since the demand for oil is inelastic,relatively low production rates drive up prices and profits.Saudi Arabia,the world's largest and lowest cost producer,is able to influence market price; it has an incentive to keep output low.Yemen,on the other hand,is a relatively high cost producer with much smaller reserves.Use the payoff matrix in Table 14-9 to answer the following questions. a.What is the dominant strategy for Saudi Arabia? b.What is the dominant strategy for Yemen? c.What is the Nash equilibrium?

If an industry is made up of five identical firms,the four-firm concentration ratio is

A game in which each player adopts its dominant strategy