Authors libby rittenberg 598

KEY TAKEAWAYS  The key characteristics of oligopoly are a recognition that the actions of one firm will produce a response from rivals and that these responses will affect it Each firm is uncertain what its rivals’ responses might be  The degree to which a few firms dominate an industry can be measured using a concentration ratio or a Herfindahl–Hirschman Index  One way to avoid the uncertainty firms face in oligopoly is through collusion Collusion may be overt, as in the case of a cartel, or tacit, as in the case of price leadership  Game theory is a tool that can be used to understand strategic choices by firms  Firms can use tit-for-tat and trigger strategies to encourage cooperative behavior by rivals TRY IT! Which model of oligopoly would seem to be most appropriate for analyzing firms’ behavior in each of the situations given below? When South Airlines lowers its fare between Miami and New York City, North Airlines lowers its fare between the two cities When South Airlines raises its fare, North Airlines does too Whenever Bank A raises interest rates on car loans, other banks in the area too In 1986, Saudi Arabia intentionally flooded the market with oil in order to punish fellow OPEC members for cheating on their production quotas Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 598