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Oligopoly
| Term | Definition |
|---|---|
| Oligopoly | Where a few large firms have the majority of the market share |
| Concentration rate | Where a few large firms have the majority of the market share |
| Predatory pricing | Setting a price that may bankrupt a competitor firm in order to try and take it over |
| Integration | Combining with other firms |
| Interdependent | Where actions by one firm will have an effect on the sales and revenue of other large firms in the market |
| Price war | Where firms competitively lower prices to increase their market share |
| Reactive behaviour | The action taken by firms in response to a change in behaviour of a competitor |
| Kinked demand curve | A theoretical approach that tries to analyse the reasons for price stability in oligopoly |
| Brand loyalty | A measure indicating the degree to which consumers will purchase a firms’ product rather than a competing firms’ product |
| Discontinuous MR curve | Region over which a change in MC will not lead to a change in the firms’ price and output levels |
| Game theory | An analysis of how games players react to changing circumstances and plan their response |
| Zero sum game | Where a gain by one player is matched by a loss by another player |
| Risk averse | Where one party does not take any action that might promote retaliatory activity by another party |
| Collusion | Where firms cooperate in their pricing and output policies |
| Prisoners’ dilemma | Where prisoners both choose the worst option |
| Nash equilibrium | Where the optimum strategy is to maintain current behaviour |
| Restrictive agreements | Where firms collude to indulge in anti-competitive policy |
| Joint profits | Where firms agree to max shared rather than their individual profits |
| Cartel | A group of firms working together, or colluding |
| Price leader | A firm that establishes the market price that all other firms in the agreement follow |
| Barometric price leadership | A firm whose price changes are accepted as they are skilful at interpreting market conditions |
| Parallel pricing | Where firms charge identical prices |
| Tacit collusion | Where firms have reached an ‘agreement’ as to each other’s behaviour as a result of repeated observations over time |
| Menu costs | The time and money spent by businesses in changing their prices in line with inflation |
Created by:
zuigy
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