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cartel
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a collection of firms that make production, pricing, and other decisions jointly
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collusion
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when firms make joint production or pricing decisions
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cost-plus pricing
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adding a percentage mark-up to the average variable cost; one of the major models of behaviors of oligopolies
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game theory
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one of the main tools for analyzing oligopoly behavior; it provides a way to predict the behavior of oligopolists who base their decisions on their expectations about their rivals' decisions
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kinked demand curve
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a model that explains the behavior of an oligopolist in an industry where the firm expects its rivals to match its price decreases but not its price increases; one of the major models of oligopoly behavior
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oligopoly
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a market structure characterized by a few sellers with a high ratio of market concentration who make pricing and output decisions interdependently
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payoff matrix
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the visual representation of game theory
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price leadership
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a model that explains the activity in an industry where one firm clearly dominates and the other firms follow the lead of the dominant firm; one of the major models of oligopoly behavior
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prisoner's dilemma
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a standard game theory model; when each party acts independently, the resulting outcome is less desirable than if the parties colluded
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tacit collusion
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collusion that occurs even though the parties don't communicate with each other directly or through a third party
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