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Questions and Answers
An oligopoly consists of few sellers offering similar or identical products.
An oligopoly consists of few sellers offering similar or identical products.
True
In an oligopoly, firms’ decisions on price or quantity do not influence competitors.
In an oligopoly, firms’ decisions on price or quantity do not influence competitors.
False
If oligopolies cooperate, they can achieve monopoly-level profits by acting as a cartel.
If oligopolies cooperate, they can achieve monopoly-level profits by acting as a cartel.
True
If one firm cheats in a collusion agreement, it can achieve higher profits temporarily.
If one firm cheats in a collusion agreement, it can achieve higher profits temporarily.
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If both firms cheat and sell more than the agreed quantity, their profits are lower than if they had cooperated.
If both firms cheat and sell more than the agreed quantity, their profits are lower than if they had cooperated.
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Game theory studies strategic interactions where participants’ outcomes depend on others’ decisions.
Game theory studies strategic interactions where participants’ outcomes depend on others’ decisions.
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The Prisoners’ Dilemma shows that rational self-interest leads to the cooperative outcome.
The Prisoners’ Dilemma shows that rational self-interest leads to the cooperative outcome.
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Nash equilibrium occurs when neither player can improve their outcome by unilaterally changing strategies.
Nash equilibrium occurs when neither player can improve their outcome by unilaterally changing strategies.
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In a repeated game, strategies like “tit-for-tat” can encourage cooperation.
In a repeated game, strategies like “tit-for-tat” can encourage cooperation.
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In an “ad wars” scenario, the dominant strategy is for both firms to advertise even though both would benefit from not advertising.
In an “ad wars” scenario, the dominant strategy is for both firms to advertise even though both would benefit from not advertising.
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A dominant strategy is one that benefits a player regardless of the other player’s actions.
A dominant strategy is one that benefits a player regardless of the other player’s actions.
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The “tit-for-tat” strategy means a firm always cheats in response to any behavior from a competitor.
The “tit-for-tat” strategy means a firm always cheats in response to any behavior from a competitor.
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When oligopolists compete in a one-shot game, the Nash equilibrium often involves cheating rather than cooperation.
When oligopolists compete in a one-shot game, the Nash equilibrium often involves cheating rather than cooperation.
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