Economics Dr.

Katherine Sauer

Chapter 17 Reading Notes: Oligopoly I. Markets with only a Few Sellers A. Duopoly Example

B. Competition, Monopolies, and Cartels Perfect competition outcome: Monopoly outcome:

The term collusion refers to: A cartel is:

C. Equilibrium for an Oligopoly

A Nash Equilibrium is a situation:

There is tension between ____________________ and ______________________.

When firms in an oligopoly individually choose production to maximize profit, they produce:

D. How the Size of an Oligopoly Affects the Market Outcome

Output Effect: Price Effect:

As the number of sellers in an oligopoly grows:

II. Economics of Cooperation The prisoners dilemma is a situation that illustrates:

Refer to Figure 1. A dominant strategy is:

A. Oligopolies as a Prisoners Dilemma Refer to Figure 2.

B. Examples of Prisoners Dilemmas 1. Arms Races

2. Common Resources

C. Prisoners Dilemma and Societys Welfare

D. Why People Sometimes Cooperate

III. Public Policy Toward Oligopolies A. Restraint of Trade and the Antitrust Laws

B. Controversies over Antitrust Policy 1. Resale Price Maintenance

2. Predatory Pricing

3. Tying