BU111 Chapter Notes - Chapter 17: Nash Equilibrium, Oligopoly, Game Theory
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BU111 Full Course Notes
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Oligopoly the market structure where only few sellers offer similar or identical products. Game theory the study of how people behave in strategic situations. Situation where people choose among alternate courses of action and must consider how others might respond to the action and that person takes. Works best when work together and act like a monopolist producing small quantity of output and charging a price above marginal cost. Collusion an agreement among firms in a market about quantities to produce or prices to chance. Cartel a group of firms acting in unison. 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. When firms in an oligopoly individually choose production to maximize profit, they produce a quantity of output greater than level produced by monopoly and less than competition. The oligopoly price is less than monopoly but greater than competitive price.
