Interdependence Duopoly Duopolist Collusion Cartel Noncooperative behavior Game theory Payoff Payoff matrix Prisoners’ dilemma Dominant strategy Nash equilibrium Antitrust policy Strategic behavior Tit for tat Tacit collusion Price war Product differentiation Price leadership Nonprice competition Zero-profit equilibrium Excess capacity Brand name | the reward received by a player in a game, such as the profit earned by an oligopolist. when a monopolistically competitive industry’s firms produce less than the output at which average total cost is minimized. when firms act in their own self-interest, ignoring the effects of their actions on each other’s profits. an attempt by a firm to convince buyers that its product is different from the products of other firms in the industry. when a firm attempts to influence the future behavior of other firms. a group of producers that agree to restrict output in order to increase prices and their joint profits. when sellers cooperate to raise their joint profits. one firm sets its price first, and other firms then follow. shows how the payoff to each of the participants in a two-player game depends on the actions of both. Such a matrix helps us analyze situations of interdependence. a name owned by a particular firm that distinguishes its products from those of other firms. involves efforts by the government to prevent oligopolistic industries from becoming or behaving like monopolies. when firms limit production and raise prices in a way that raises each other’s profits, even though they have not made any formal agreement. when firms that have a tacit understanding not to compete on price use advertising and other means to try to increase their sales. an oligopoly consisting of only two firms. a player’s best action regardless of the action taken by the other player. when a monopolistically competitive industry’s firms make zero profit at their profit-maximizing output quantities. a game based on two premises: (1) each player has an incentive to choose an action that benefits him- or herself at the other player’s expense; and (2) when both players act in this way, both are worse off than if they had acted cooperatively. a strategy involving playing cooperatively at first, then doing whatever the other player did in the previous period. when tacit collusion breaks down and aggressive price competition causes prices to collapse. the result when each player in a game chooses the action that maximizes his or her payoff, given the actions of other players. each of the two firms in a duopoly. the study of behavior in situations of interdependence. when the outcome (profit) of each firm depends on the actions of the other firms in the market. |