Key Terms

Key Terms

a group of firms that collude to produce the monopoly output and sell at the monopoly price
when firms act together to reduce output and keep prices high
differentiated product
a product that is perceived by consumers as distinctive in some way
an oligopoly with only two firms
game theory
a branch of mathematics often used by economists that analyzes situations in which players must make decisions and then receive payoffs based on what decisions the other players make
imperfectly competitive
firms and organizations that fall between the extremes of monopoly and perfect competition
kinked demand curve
a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increases
monopolistic competition
when many firms compete to sell similar but differentiated products
when a few large firms have all or most of the sales in an industry
prisoner’s dilemma
a game in which the gains from cooperation are greater than the rewards from pursuing self-interest