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Chapter 16 - Similar to advertising both advertise = split...

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Chapter 16 : Oligopoly - Few competitors ex. Ps3, Xbox 360 - Similar/identical products - Monopolistic Competition - Many firms - Similar but not identical products ex. Resturants - Between monopoly/competitive. Produces more than monopoly, less than comp. Price is below monopoly, but higher than comp. - Lots of firms = p close to mc =q close to social optimal - Free trade increases oligopoly no. = drives down price - Incentive to “cheat” Game theory: Acting strategically based on the other firm’s potential actions (cooperation Vs self-interest) Dominant strategy- best action regardless what the competitor chooses Collusion: Agreement between firms on price or quantity
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*Cartel: a group acting in unison= acts like a monopoly. Charges above mc and produces below social optimal quantity. HOWEVER, this is PROHIBITED by competition laws.
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Unformatted text preview: Similar to advertising: both advertise = split profit, one advertises=higher profit * Common resources, shared lake; more pump=more water/profit Might cooperate if they play the dilemma enough times and look at long run benefit * an eye for an eye, penalizing the other, could make them cooperate *Should try to make them competitive Predatory pricing to drive out small competitors. Tying/ Bundling: a package of something desirable+undesirable ex. Hot girl and her fat friend Nash equilibrium a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen Resale price maintenance can be viewed as anticompetitive, since price cannot go below the set amount. However...
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Chapter 16 - Similar to advertising both advertise = split...

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