<< Chapter < Page Chapter >> Page >
  • Card 11 / 19:
    Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as shown in the prisoner’s dilemma box in . Firm B colludes with Firm A Firm B cheats by selling more output Firm A colludes with Firm B A gets $1,000, B gets $100 A gets $800, B gets $200 Firm A cheats by selling more output A gets $1,050, B gets $50 A gets $500, B gets $20 Assuming that the payoffs are known to both firms, what is the likely outcome in this case?

    Firm B reasons that if it cheats and Firm A does not notice, it will double its money. Since Firm A’s profits will decline substantially, however, it is likely that Firm A will notice and if so, Firm A will cheat also, with the result that Firm B will lose 90% of what it gained by cheating. Firm A will reason that Firm B is unlikely to risk cheating. If neither firm cheats, Firm A earns $1000. If Firm A cheats, assuming Firm B does not cheat, A can boost its profits only a little, since Firm B is so small. If both firms cheat, then Firm A loses at least 50% of what it could have earned. The possibility of a small gain ($50) is probably not enough to induce Firm A to cheat, so in this case it is likely that both firms will collude.

  • Keyboard Shortcuts

    Previous Card ← Previous Card Button
    Next Card → Next Card Button
    Flip Card // Return / Space

Questions & Answers

what is a deductive reasoning
tobi Reply
Deductive reasoning makes use of to arrive at the conclusion.That is, the premise must be real and put to rest .
Jeremiah
Deductive statement makes use of facts to arrive at the conclusion.That is ,the premise must be real and put to rest in order to produce the required results.
Jeremiah
price change in case of an inferior good
divya Reply
Search on Google
Harsh
what is frontier
Ebrima Reply
I want the answers
Gideon
What is the difference between microeconomics and macroeconomics?
Krysstel Reply
what is demand
Chidex Reply
demand Is the quantity of goods a consumer is willing and able to produce at a given price and at a particular period of time.
inioluwa
fixed and variable factors of production
muqtaar Reply
James' income declines, and as a result, he buys more spinach. Is spinach an inferior or a normal good? What happens to James' demand curve for spinach?
Alwyn Reply
When the price floor is implemented, the equilibrium quantity will decrease. Is it true or wrong?
naim Reply
it's true
Nathaniel
what is elasticity
Chibuzor Reply
calculate the price elasticity of demand for Mr chibuzor (y) using both arc and price elasticity formulae
Chibuzor
The best way to understand elasticity is just looking to your behavior as a consumer. Just think about the basic need like food. We all know without, one end up dying if could not eat for a couple of days. It is a reason we say the demand is inelastic. It's impossible to survive without food.
busywork
On the other hand, the demand for luxury goods is elastic because it's sensitive to price changes as it is possible to survive without such good like expensive car. We say demand for such goods is elastic because as consumers, we have an option of not buying as it's possible to survive without them.
busywork
pls how do u calculate for the opportunity cost of two commodities when giving two commodities in question, and one is measured in tons and the other is measured in units
DBA Reply
what are tge factors that causes change in demand
emy Reply
change in income change in price change in taste and preference
Wahida
Change in price, ,availability of substitutes ,change in consumer preferences, changes in economic situation.
busywork
Qd=f(Y, P ,Ps ,F, T ,W , Pop)
Zeeshan
substitute goods taste preference income
Hermina
income increase and decrease is the most important reason of demand changing
Taufiq
Price variable : price This leads to a same direction change for certain luxury goods, and to an opposite direction change for the ordinary, normal, inferior... that's the remaining types of goods. As a result, the is a movement along the demand curve. We also have non price variables like income,
Jonas
We also have non price variables like income, that increases the willingness to pay of the consumers and thus increase the demande at any price, leading to a shift of the demand curve to the right if income increases or to the left of income decreases. A change in income also leads to
Jonas
A same direction change in demand for the normal good and for the opposite direction change for inferior goods.
Jonas
We also have other non price variables like taste, time horizon,...
Jonas
what are the production function
Mohammed Reply
capital and land and labor that is called the function production
Mustafe
production is a function of capital and labor.
Zeeshan
land labor capital are the function of production
Mumin
yes
Mustafe
when we existing economic we classify in this action
Mustafe
the technical relationship b/w input and output
Neha
Neha can we say it is not technical relationship
Waseem
How u can say like that Waseem ji
Neha
as far I know it is physical and technical relationship because producer are rational
Neha
so they use physical inputs to get physical output by technical process
Neha
how to use price elasticity of demand for analysis water demand?
Pupu
The production function is the relation between inputs and outputs. It shows how a producer combines the sets of available inputs and resources to maximise his output and thus his turnover.
Jonas
What is indifference curve
JUMA
the are use price to get quality of good and service
Adamu
1. Interdepwndence 2. advertising, 3. group behaviour 4. Competition 5. barriers to entry of firm 6. lack of uniformity 7. Existence of price rigidity 8. No unique pattern of pricing behaviour 9. Indeterminatensess of demand curve
Shashan Reply
characteristics of oligopoly
BONIPHACE Reply
please explain to me about the curves
girlie Reply
they diagrams used to illustrate relationship between variables in economics
Ayuuba
how
aliyu
I am pretty good what about you
Ayuuba
the graphical representation of mathematical equation called curve
Peer
yeah !
Hadya
mention not hadya
Peer
ok i understand
Chris
can you explain the relationship between macro and micro economics please
Ezenwobi
yes I can explain so macro is the agrigarative or whole where micro is the individual company
Mustafe
what are thay four of factor production
Mustafe
micro focuses small economy such as individual, business, macro focuses as whole economy such as tax, government expenditure, unemployment
Mumin
they are land, laboor,capital,enterpruener
Mumin
mustafe understood or not
Mumin

Get the best Microeconomics course in your pocket!





Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
Flash Cards plugin by Curtis Blackwell github.com/curtisblackwell/flash_cards
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Microeconomics' conversation and receive update notifications?

Ask