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11.11: Key Terms

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    108714

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    Imperfectly competitive firms face a downward-sloping demand curve, and their output price reflects the quantity sold.

    Oligopoly defines an industry with a small number of suppliers.

    Monopolistic competition defines a market with many sellers of products that have similar characteristics. Monopolistically competitive firms can exert only a small influence on the whole market.

    Duopoly defines a market or sector with just two firms.

    Concentration ratio: N-firm concentration ratio is the sales share of the largest N firms in that sector of the economy.

    Differentiated product is one that differs slightly from other products in the same market.

    The monopolistically competitive equilibrium in the long run requires the firm's demand curve to be tangent to the ATC curve at the output where MR=MC.

    Collusion is an explicit or implicit agreement to avoid competition with a view to increasing profit.

    Conjecture: a belief that one firm forms about the strategic reaction of another competing firm.

    Game: a situation in which contestants plan strategically to maximize their profits, taking account of rivals' behaviour.

    Strategy: a game plan describing how a player acts, or moves, in each possible situation.

    Nash equilibrium: one in which each player chooses the best strategy, given the strategies chosen by the other player, and there is no incentive for any player to move.

    Dominant strategy: a player's best strategy, whatever the strategies adopted by rivals.

    Payoff matrix: defines the rewards to each player resulting from particular choices.

    Credible threat: one that, after the fact, is still optimal to implement.

    Cournot behaviour involves each firm reacting optimally in their choice of output to their competitors' decisions.

    Reaction functions define the optimal choice of output conditional upon a rival's output choice.

    This page titled 11.11: Key Terms is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Douglas Curtis and Ian Irvine (Lyryx) via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.