Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
monopolistic competition product differentiation oligopoly mutual interdependence cartel kinked demand curve game theory simultaneous- sequential- Nash equilibrium dominant strategy Prisoner’s Dilemma trigger strategies tit- | The study of how individuals and firms make strategic decisions to achieve their goals when other parties or factors can influence that outcome. Games in which players’ actions occur at the same time, forcing players to make decisions without knowing how the other players will act. These games are analyzed using diagrams called game tables. Occurs when a player chooses the same strategy regardless of what his or her opponent chooses. When only a few firms constitute an industry, each firm must consider the reactions of its competitors to its decisions. One firm’s product is distinguished from another’s through advertising, innovation, location, and so on. An oligopoly model that assumes that if a firm raises its price, competitors will not raise theirs. However, if the firm lowers its price, its competitors will lower their price to match the reduction. This leads to a kink in the demand curve and relatively stable market prices. An agreement between firms (or countries) in an industry to formally collude on price and output, then agree on the distribution of production. An outcome that occurs when all players choose their optimal strategy in response to all other players’ potential moves. At a Nash equilibrium, no player can be better off by unilaterally deviating from the noncooperative outcome. A noncooperative game in which players cannot communicate or collaborate in making their decisions, which results in inferior outcomes for both players. Many oligopoly decisions can be framed as a Prisoner’s Dilemma. Action is taken contingent on your opponent’s past decisions. A market structure with a large number of firms producing differentiated products. This differentiation is either real or imagined by consumers and involves innovations, advertising, location, or other ways of making one firm’s product different from that of its competitors. Games in which players make moves one at a time, allowing players to view the progression of the game and to make decisions based on previous moves. A market with just a few firms dominating the industry, where (1) each firm recognizes that it must consider its competitors’ reactions when making its own decisions (mutual interdependence), and (2) there are significant barriers to entry into the market. A trigger strategy that rewards cooperation and punishes defections. If your opponent lowers its price, you do the same. If your opponent returns to a cooperative strategy, you do the same. |