econ ch 15 outline - Kristin Chen ECON CH 15Oligopoly 1...

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Kristin Chen ECON CH 15–Oligopoly 1. Prevalence of Oligopoly a. Oligopoly = industry with only a small number of producers b. Oligopolist = producer in an oligopoly c. Imperfect competition = when no one firm has a monopoly but producers nonetheless realize that they can affect market prices in an industry i. 2 forms: oligopoly & monopolistic competition d. Most importance source of oligopoly = economies of scale 2. Understanding Oligopoly a. Duopoly = oligopoly consisting of only 2 firms b. Duopolist = each firm in a duopoly c. Collusion = when sellers cooperate to raise each others’ profits d. Cartel = strongest form of collusion, arrangements that determines how much each firm is allowed to produce e. Noncooperative behavior = when firms ignore the effects of their actions on each other’s profits 3. Games Oliopolists Play a. Interdependence = when decisions of 2+ firms significantly affect each other’s profits b. Game theory = study of behavior in situations of interdependence c. Payoff
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