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Barriers to Entry
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factors that prohibits firm from entering an industry
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Cartel
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a group of producers that typically creates a formal agreement specifying how much each member will produce and charge
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Collusion
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situation in which firms act together and in agreement to fix prices, divide market, or otherwise restrict competition
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Differentiated oligopoly
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oligopoly in which products differ from competitors, such that buyers are not indifferent to the seller when prices change
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Dilemma of Regulation
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The trade off faced by a regulatory agency in setting the maximum legal price a monopolist may charge.
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Excess capacity
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Plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost
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Fair-return price
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For natural monopolies subjected to rate regulation, the price that would allow the regulated monopoly to earn a normal profit; a price equal to average total cost
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four-firm concentration ratio
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The percentage of total industry sales accounted for by the top four firms in an industry
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Game Theory
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Study of how people behave in strategic situations in which individuals must take into account not only their own possible actions but also the possible reactions of others.
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Herfindahl Index
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A measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry
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Homogeneous oligopoly
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Oligopoly where firms produce a standarized product
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Import Competition
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the competition that domestic firms encounter from the products and services of foreign producers
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Inerindustry Competition
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Kinked-demand curve
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a model used to explain the stability of oligopoly pricing, oligopolist will lose sales if price is increased but gain only momentarily if price is lowered (because others will match the lowered price))
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Limit pricing
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Monopolstic Competition
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Market situation in which a large number of sellers offer similar but slightly different products and each has some control over price
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Mutual Interdependence
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each oligopolistic firm must consider the reactions of it's rivals when it determines it's price policy
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Network Effects
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present if the value of a product to each user (including existing) increases as the total number of users rises
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Nonprice Competition
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competition based on factors that are not related to price, such as product quality, service and financing, business location, and reputation.
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Nonrivalrous consumption
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Oligopoly
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a market structure in which a few large firms dominate a market
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Price Discrimination
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selling a specific product at more than one price when the price differences are not justified by cost differences.
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Price Leadership
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Pattern of pricing in which one firm regularly announces price changes that other firms then match
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Price War
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successive price cutting by competitors to increase or maintain their unit sales or market share
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Product Differentiation
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Manufacturer's use of minor differences in quality and features to try to differentiate between similar goods and services.
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Pure Monopoly
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single firm is the sole producer of a product for which there are no close substitutes
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Rent-seeking behavior
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Any activity designed to transfer wealth or income to a particular firm or individual at another's expense.
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Simultaneous consumption
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products ability to satisfy a large number of consumers at the same time.
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Socially optimal price
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price is most efficient allocation of resources and equal to marginal cost of the product.
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strategic behavior
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X-inefficiency
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When a firm produces output at higher cost than necessary to produce it.
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