Microeconomics ch 14, 17

-a form of industry (market) structure characterized by a few dominant firms
-products may be homogeneous or differentiated
-firms have some control over price, some limited entry, strategic behavior (what are other firms doing and what am I doing in response)
-the behavior of anyone firm depends to a great extent on the behavior of others

analyzes the choices made by rival firms, people, and even governments when they are trying to maximize their own well-being while anticipating and reacting to the actions of others in their environment

one player has a strategy that is best to do no matter what the other player does

a game in which the players are prevented from cooperating and in which each has a dominant strategy that leaves them both worse off than if they could cooperate

the result of all players playing their best strategy given what their competitors are doing

-a strategy chosen to maximize the minimum gain that can be earned
-one that plays a maximin strategy assumes that the opposition will play the strategy that does the most damage
-choose the best of the worst possible set of outcomes

- collusion occurs when price and quantity fixing agreements among producers are explicit, tacit collusion occurs when such agreements are implicit
-when firms end up fixing prices without specific agreement
-the fewer and more similar the firms, the easier it will be for tacit collusion to occur

a repeated game strategy in which a player responds in kind to an opponents play

-the amount that comes from a possible outcome or result
-the amount that one player receives in each of these situations

the sum of the payoffs associated with each possible outcome of a situation weighted by its probability of occurring

-the sum of the utilities coming from all possible outcomes of a deal, weighted by the probability of each occurring

-individuals who prefer a certain payoff to an uncertain payoff with an equal expected value
-expected utility< utility

-a person's willingness to take a bet with an expected value of zero
-expected utility= utility

-refers to a person's willingness to take bets with negative expected values
-expected utility> utility

the more of any one good consumed in a period, the less utility will be generated by each additional (marginal) unit of that good

one of the parties to a transaction has information relevant to the transaction that the other party does not have

a situation in which asymmetric information results in high-quality goods or high-quality consumers being squeezed out of transactions because they cannot demonstrate the quality of the product they are offering for sale

-actions taken by buyers and sellers to communicate quality in a world of uncertainty

-arises when one party to a contract changes behavior in response to that contract and thus passes on the costs of that behavior change to the other party
-contracting parties cannot always determine the future behavior of the person with whom they are contracting and this reduces contracting
-if all future behavior could be predicted, contracts could be written to try to eliminate undesirable behavior
if the contract absolves one party of the consequences of his/ her action and people act in their own self-interest, the result is inefficient