Market Fundamentals
According to the Federal Reserve Bank of St. Louis, what is a market called when only a few sellers or suppliers dominate?
An Oligopoly
What is the term for when firms agree (often illegally) to set higher prices and act like a monopoly to maximize joint profits?
Collusion
In Game Theory, what is the situation where every player is playing their "best response" to their opponent’s strategy?
Nash Equilibrium.
List two of the five "Barriers to Entry" mentioned in the presentation that prevent new businesses from entering the market.
Economies of scale, government regulations, patents/resource control, access to distribution, or brand loyalty
When a dominant firm (usually with lower costs) sets a price and others follow to avoid destructive competition, it is known as what?
Price Leadership.
Name the model where a leading company decides its production quantity first, and other companies decide their quantity afterward.
Stackelberg Model.
This term describes a situation where firms must consider their competitors' likely reactions before changing their own prices or output.
Strategic Interdependence.
Instead of fighting on price, firms often use branding, advertising, and product differentiation. What is this strategy called?
Non-Price Competition
In the "Super Bowl Secret" exercise, what choice represents the "Nash Equilibrium" for Coke and Pepsi?
Both firms "Leak Information"
Why does the "Kinked Demand Curve" lead to price rigidity?
Because raising prices significantly reduces demand (elastic), while lowering prices doesn't increase demand enough to offset lost revenue (inelastic).
In an oligopoly, what typically happens to profits when a "Price War" occurs?
Prices fall significantly, leading to lower profit margins for all firms involved.
Name the two other mathematical duopoly models mentioned in the presentation besides the Stackelberg Model.
Cournot and Bertrand Models.