Chap019 - Chapter 19 - Oligopoly Chapter 19: Oligopoly Main...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 19 - Oligopoly Chapter 19: Oligopoly Main Concepts and Learning Objectives This chapter focuses on strategic interaction among oligopolists. The chapter begins with analysis of reaction functions among duopolists, and then broadens that discussion to encompass the competitive implications of production differentiation. The chapter then focuses on collusion, with analysis of the price and profit implications of collusion and conditions that facilitate or inhibit collusion. Third, the chapter examines entry decisions, the impact of entry on price and profit, and strategic behavior to deter entry. Finally, the chapter considers the implications of these analyses for antitrust policy. Students who master the material presented in this chapter will be able to: Use game theory to analyze strategic interactions among firms, including o Price competition to sell identical products o Competition focused on quantity decisions o Price competition with differentiated products o Collusion o Entry decisions o Strategic behavior to impact future competition Use the results of the game theory analysis to examine antitrust policy 19-1 Chapter 19 - Oligopoly Multiple Choice Quiz (10 questions) covering main points: 1. In the Bertrand model, the Nash Equilibrium occurs when a. both firms charge the monopoly price and split the monopoly quantity equally between them. b. one firm drives its rival out of the market, and then sets the monopoly price. c. both firms set price equal to marginal cost. d. none of the above 2. The Cournot model a. is useful when firms make capacity or inventory decisions that determine the quantity available for sale. b. implies that price will exceed marginal cost. c. has a Nash Equilibrium. d. all of the above 3. In a Cournot oligopoly a. if there are two firms, the deadweight loss is smaller than the deadweight loss that would occur with monopoly. b. as the number of firms increases, price falls. c. Both a and b d. None of the above 4. When two competitive products (such as Coke and Pepsi) are more similar (as viewed by consumers), the two product prices are a. closer to marginal cost. b. further above marginal cost. 5. Collusion is harder to sustain when the number of firms a. is larger. b. is smaller. 6. When firms engage in tacit collusion, they a. collude to maintain price above the noncooperative level without communicating. b. communicate to reach agreement about a price that each firm will charge. 7. Analysis of the difference between price and marginal cost in the ready-to-eat cereal industry indicates that tacit collusion a. exists in this industry. b. does not exist in this industry. 19-2 Chapter 19 - Oligopoly 8. ValueJet hoped to avoid a price war with Delta by a. deliberately avoiding direct competition by scheduling flights that would not be attractive to business travelers....
View Full Document

Page1 / 26

Chap019 - Chapter 19 - Oligopoly Chapter 19: Oligopoly Main...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online