TOPICS
- Oligopoly
- Mergers
- Game Theory
OUTCOMES
Describe the
characteristics of an oligopolistic industry.
Differentiate between homogeneous
and differentiated oligopolies.
Describe and compare the
concentration ratio and the Herfindahl index as ways to
measure market dominance in an industry.
Distinguish between three types of
mergers.
Explain how the Herfindahl index
is used as a guideline by the government in deciding
whether to permit horizontal mergers.
Use a profit-payoffs matrix (game
theory) to explain the mutual interdependence of two
rival firms and why oligopolists might tempt to cheat on
a collusive agreement.
Identify four possible models of
oligopolistic price-output behavior.
Use the kinked demand curve theory
to explain why prices tend to be inflexible.
Why is there a "kink" in the
kinked demand curve?
Understand the adjustment process
from the short run to the long run and the role of
barriers to entry (why do oligopolistic firms earn
economic profits in the long run?)
Draw the long run equilibrium
graph for a kinked demand oligopoly and indicate the
profit maximizing quantity, the allocatively efficient
quantity, and the productively efficient
quantity.
Explain the major advantages of
collusion for oligopolistic producers and list the
obstacles to collusion behavior.
Draw the long run equilibrium
graph for a collusive oligopoly and indicate the profit
maximizing quantity, the allocatively efficient quantity,
and the productively efficient quantity. (Hint: it is
just like the long run monopoly graph.)
Explain price leadership as a form
of tacit collusion.
List the positive and negative
effects of advertising.
Explain why some economists assert
that oligopoly is less desirable than pure
monopoly.
Are these mergers good for society
(efficiency)?
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