the study of behavior in situations of interdependence.

the attempt by a firm to convince buyers that its product is different from the products of other firms in the industry.

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 firm in an industry with only a small number of producers.

cooperation among producers, without a formal agreement, to limit production and raise prices so as to raise one anothers’ profits.

efforts undertaken by the government to prevent oligopolistic industries from becoming or behaving like monopolies.

an agreement among several producers to obey output restrictions in order to increase their joint profits.

an industry with only a small number of producers.

a player’s best action regardless of the action taken by the other player.

when a firm attempts to influence the future behavior of other firms.

the reward received by a player in a game, such as the profit earned by an oligopolist.

actions by firms that ignore the effects of those actions on the profits of other firms.

an oligopoly consisting of only two firms.

involves playing cooperatively at first, then doing whatever the other player did in the previous period.

(also known as a Nash equilibrium) when each player in a game chooses the action that maximizes his or her payoff given the actions of other players, ignoring the effects of his or her action on the pay-offs received by those other players.

a collapse of prices when tacit collusion breaks down.

(also known as a noncooperative equilibrium) when each player in a game chooses the action that maximizes his or her payoff given the actions of other players, ignoring the effects of his or her action on the payoffs received by those other players.

one of the two firms in a duopoly.

cooperation among producers to limit production and raise prices so as to raise one another’s profits.

a market structure in which there are many competing producers in an industry, each producer sells a differentiated product, and there is free entry and exit into and from the industry in the long run.

a market structure in which no firm is a monopolist, but producers nonetheless have market power they can use to affect market prices.

when a firm’s decision significantly affects the profits of other firms in the industry.

a game based on two premises: (1) Each player has an incentive to choose an action that benefits itself 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.