Compare an oligopoly market to a perfect competition and monopolistic competition type of market. The similarities and differences between each type of market
Oligopoly Market
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Perfect Competition
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Monopolistic Competition
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Dominated by a few large firms
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Large number of buyers and sellers
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Many small firms
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Entry by new firms is difficult
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Easy entrance into and exit from the market
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Easy entrance into and exit from the market
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Each firm has significant control over its’ prices
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Do not have control over its’ prices
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Some control over price
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Mutual interdependence exists between firms
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there are many substitutes for products in this market
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There are differentiated products
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What is the market type you consider the best choice. Explain why.
Perfect competition is the best market because as a consumer you have more choices and places to buy the same products from. The businesses need to be conscience of what they are charging or consumers will take their business elsewhere. The consumers have more control over the market and the price of the products in this type of market.
With your new knowledge, how do you feel as a consumer?
Do you feel in control of your purchasing choices?
Yes for the most part because there are many differentiated products and substitute products so I do not have to pay more than I feel a certain product is worth. Because we have competition there are sales and firms need to be conscience about the price they are charging giving the consumer more control over the market and prices.
What are the main ideas behind game theory?
Game theory uses mathematics to represent and capture behavior in specific strategic situations (or games) in which the success of an individual's choices is directly linked to the choices of others.
How did it develop?
Game theory was originally developed to analyze competitions where one individual achieves better results at another individual's expense. Today game theory is applied to several interactions across many fields.
Is there evidence of game theory in the current economy? Explain.
Yes. There is evidence of game theory because of competition. Why when two businesses that start up at the same time with very similar products priced about the same does one go on to be very successful and the other may not and close down. This is game theory. One competitor achieved better results at the other’s expense. An example of this is Blue Ray technology by Sony and HD DVD technology. They were two products that were released around the same time that were very similar products but Sony Blue Ray technology beat out HD DVD technology and you can no longer buy HD DVD players or disks only Blue Ray.
How does the payoff matrix work?
A payoff matrix is a decision analysis tool that summarizes pros and cons of a decision in a tabular form. It lists payoffs (negative or positive returns) associated with all possible combinations of alternative actions (under the decision maker's control) and external conditions (not under decision maker's control).
Describe the principles behind collusive and cartel actions.
A cartel is an agreement among competing firms or organizations. Cartel members may agree to price fixing, market shares, bid rigging, division of profits, allocation of territories, allocation of customers or any combination of these. The point of collusive actions is to increase profits for each individual member by reducing competition.
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