3.3.3 Oligopoly

• What is an oligopoly characterized by in terms of the number of firms and their market share?

  Small number of large firms
• Match the type of oligopoly with its characteristic:

  Collusive Oligopoly ↔️ Firms cooperate to control prices

  Non-Collusive Oligopoly ↔️ Firms compete independently
• Game theory examines strategic decision-making between interdependent players.
• The Nash Equilibrium is a stable outcome where no player can improve their payoff by unilaterally changing their strategy.

  True
• The Prisoner's Dilemma is a classic game theory scenario where mutual cooperation leads to a better outcome
• In the Prisoner's Dilemma payoff matrix, the dominant strategy for each player is to defect.

  True
• In an oligopoly, firms typically have a small number of large firms, typically between 2 and 6.
• What type of barriers to entry are common in oligopolies?

  High barriers to entry
• What is the primary difference between a collusive and a non-collusive oligopoly?

  Cooperation versus competition
• Oligopolies can be categorized into two types: collusive and non-collusive
• Which organization is an example of a collusive oligopoly?

  OPEC
• What outcome results from the Prisoner's Dilemma's Nash Equilibrium?

  (1, 1)
• What is product differentiation in non-price competition?

  Making products unique
• The kinked demand curve model assumes competitors match price cuts but not increases.


  True
• New firms face high barriers to entry in an oligopoly.
• In a collusive oligopoly, prices are often lower than in a non-collusive oligopoly.

  False
• What is a Nash Equilibrium in game theory?

  Stable outcome with no improvement
• Game Theory is the study of strategic decision-making between interdependent players
• What is a dominant strategy in game theory?

  Best choice regardless of others
• Match the strategy with its description:

  Cooperate ↔️ Both players choose to cooperate, leading to a higher joint payoff

  Defect ↔️ Both players choose to defect, leading to a lower joint payoff
• What is an oligopoly in market structure terms?

  Small number of large firms
• In an oligopoly, firms must consider the actions of their competitors.


  True
• Oligopolies differ from perfect competition, which has many small firms, and monopoly, which has a single dominant firm
• Collusive oligopolies involve firms agreeing to cooperate on prices and market share.


  True
• How does an oligopoly differ from perfect competition?

  Small number of firms
• In a collusive oligopoly, firms cooperate to control prices and market share.


  True
• A Nash Equilibrium is a stable state where no player can improve their payoff by unilaterally changing their strategy
• Firms in an oligopoly engage in non-price competition due to interdependence and high barriers to entry.


  True
• In a price leadership model, the market leader sets the price and other firms follow
• What are two key factors firms in an oligopoly must consider when setting prices?

  Interdependence and barriers to entry