Oligopoly (Revision Quizlet Activity)

Test your understanding of oligopoly theory with this Quizlet revision activity! There are eightteen terms in this quiz.

Key Term Summary for Oligopoly

Abnormal profit: Any profit in excess of normal profit - also known as supernormal profit

Altruism: Disinterested and selfless concern for the well-being of others

Collusive oligopoly: When several large firms in an industry act to restrict price or output or share out the market

Concentration ratio: Measures the combined market share of threading firms in an industry

Duopoly: Market dominated by two rivals firms

Duopsony: Two major buyers of a good or service in a market

First mover advantage: When a business can develop a competitive advantage through early entry into an industry

Game theory: Study of how people behave in strategic situations

Heterogeneous goods: Products that are differentiated by design, packaging, functionality, performance.

Interdependence: When firms must take into account the likely reaction of rivals to changes in price and output

Joint profit maximisation: Price fixing with the aim of achieving an outcome associated with pure monopoly

Limit pricing: When a firm sets average revenue just low enough to discourage possible new entrants

Nash Equilibrium: Any situation where all agents in game are pursuing their best possible strategy given the strategies of all other participants

Non-price competition: Advertising and marketing strategies to increase demand and develop brand loyalty among consumers.

Pay-off matrix: A table used to simplify all of the possible outcomes of a strategic decision.

Price leadership: When other businesses accept price changes established by a dominant firm

Tacit collusion: When businesses co-operate but not formally, e.g. quiet or implied co-operation

Zero sum game: Where each participant's gain or loss is exactly balanced by losses or gains of the other participants.