ECON 101 Chapter Notes - Chapter 14: Normal-Form Game, Nash Equilibrium, Strategic Dominance

• School: U of M
• Department: Economics
• Course: ECON 101
• Professor: Mitchell Dudley

Document Summary

Oligopoly- industry with only a small number of producers. Firms compete, but also have market power- known as imperfect competition- when no one firm has a monopoly, but producers nonetheless realize they can affect market prices. 2 types of imperfect competition= oligopoly and monopolistic competition. Oligopoly depends only on # of firms, not on size. Oligopoly result of same factors that could lead to a monopoly, except weaker. Biggest source=increasing returns to scale (gives bigger producers a cost advantage over smaller producers) Hhi- market share each firm (squared) summed up. Collusion- cooperating to raise join profits in an oligopoly. Cartel- strongest form of collusion, arrangement between producers that determines. Ideal cartel solution would be to produce at max revenue, divide production evenly. Firms would have a desire to increase production to theoretically increase their profits- although if both firms do this, total revenue for both firms falls.