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Bertrand Oligopoly
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An industry which there are few firms serving many consumers;firms produce identical products at a constant marginal cost;firms compete in price and react optimally to competitors' prices;consumers have perfect info and there are no transaction costs;barriers to entry exist
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Best-Response Function (Reaction Function)
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Function that defines the profit-maximization level of output for a firm for given output levels of another firm
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Collusion
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When markets with only a few dominant firms can coordinate to restrict output to their benefit at the expense of consumers; Restricted output leads to higher market prices; is prone to cheating behavior
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Contestable Markets
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Involve strategic interaction among existing firms and potential entrants into a market. Factors are: All producers have access to the same technology;Consumers respond quickly to price changes;Existing firms cannot respond quickly to entry by lowering price;There are no sunk costs
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Cournot Equilibrium
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A situation in which neither firm has an incentive to change its output given the other firm's output
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Cournot Oligopoly
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There are few firms in the market serving many consumers;The firms produce either differentiated or homogeneous products;Each firm believes rivals will hold their output constant if it changes its output;Barriers to entry exist.
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Duopoly
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An oligopoly composed of only two firms
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Isoprofit Curve
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A function that defines the combinations of outputs produced by all firms that yield a given firm the same level of profits
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Oligopoly
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A market structure in which there are only a few firms; each is large relative to the industry; products may be identical (perfectly competitive market) or differentiated (monopolistically competitive market)
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Stackelberg Oligopoly
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There are few firms serving many consumers;Firms produce either differentiated or homogeneous products;A single firm (the leader) chooses an output before all other firms choose their outputs;All other firms (the followers) take as given the output of the leader and choose outputs that maximize profits given the leader's output.;Barriers to entry exist.
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Sweezy Oligopoly
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There are few firms in the market serving many consumers;The firms produce differentiated products; Each firm believes its rivals will cut their prices in response to a price reduction but will not raise their prices in response to a price increase;Barriers to entry exist.
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