Exam 12: Oligopoly and Strategic Behavior

Explain the underlying assumptions of the price leadership model.What conclusions can be made about the price charged and the output produced in an industry that has an implicit price leader?

In game theory,a strategy that represents the best choice for a firm no matter what the other firm does is termed

-Refer to Figure 12.3.The decision tree shows the payoffs for two firms based on the strategies they choose.If they agree to collude and hold prices at $10,and both stand by the agreement,each will earn profits of $5 million.If one firm cheats and the other does not,the firm that cheats will earn profits of $8 million and the other firm will have losses of $2 million.If they both cheat and cut prices,they will each earn profits of only $2 million.In this game,the dominant strategy for B is to

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Lil Box follows its dominant strategy it will earn

A duopoly pricing strategy results in a(n)________ profitable outcome compared to cartel pricing.

-Refer to Figure 12.3.The decision tree shows the payoffs for two firms based on the strategies they choose.If they agree to collude and hold prices at $10,and both stand by the agreement,each will earn profits of $5 million.If one firm cheats and the other does not,the firm that cheats will earn profits of $8 million and the other firm will have losses of $2 million.If they both cheat and cut prices,they will each earn profits of only $2 million.In this game,the dominant strategy for A is to

The limit price is just low enough to deter entry.

-Refer to Figure 12.3.The decision tree shows the payoffs for two firms based on the strategies they choose.If they agree to collude and hold prices at $10,and both stand by the agreement,each will earn profits of $5 million.If one firm cheats and the other does not,the firm that cheats will earn profits of $8 million and the other firm will have losses of $2 million.If they both cheat and cut prices,they will each earn profits of only $2 million.If both firms follow their dominant strategies,Firm B's profits will be

-Refer to Figure 12.11.What is Firm A's dominant strategy? What is Firm B's dominant strategy? Explain.

Which of the following is a characteristic of an oligopoly market?

Assume six firms comprising an industry have market shares of 30,30,10,10,10,and 10 percent.The Herfindahl-Hirschman Index for this industry is

-Refer to Figure 12.2.If A adopts a strategy of price fixing then the best choice for A is to choose the ________ price and the best choice for B is to choose the ________ price.

Which of the following industries was NOT charged with price fixing?

In which of the following strategic behaviors do firms in an oligopoly market usually engage?

If one duopolist chooses the highest price it will maximize its profit.

Explicit price fixing was outlawed by the ________ Act.

If the five-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal share of the market,the Herfindahl-Hirschman Index is

-Refer to Figure 12.9.If both firms follow their dominant strategies,Firm X will earn profits equal to

How do we know when a market is contestable?

Which of the following is a reason for the occurrence of an oligopoly?