6 Differentiate between homogeneous and differentiated oligopolies A

# 6 differentiate between homogeneous and

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6. Differentiate between homogeneous and differentiated oligopolies. A homogeneous oligopoly produces standardized products, while a differentiated oligopoly produces differentiated products. 7. Discuss the shortcomings of the national concentration ratios as a measure of market concentration. Although concentration ratios help identify oligopoly, they have difficulty with localized markets, interindustry competition, world trade, and dominant firms.
8. Explain game theory and how it reflects mutual interdependence. Game Theory is the study of how people behave in strategic situations. Economically it shows the mutual interdependence of oligopolistic firms using price strategies. 9. Given the following payoff matrix, identify the dominant strategy for each firm and the Nash equilibrium. The first number in the matrix is the profits for company A. Company B Charge High Price Charge Low Price Company A Charge High Price 80 / 80 23 / 100 Charge Low Price 100 / 23 57 / 57 It most likely be strategy D ( A: 57 ; B: 57), assuming there is no collusion and low pricing strategy is implemented, resulting in a profit of 57 million. 10.Explain the conditions of the kinked-demand curve and why prices tend to be inflexible. A kinked-demand curve applies only to a non-collusive oligopoly firm if its rivals will match any price decrease but ignore any price increase.

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