Game Theory and Oligopoly: Crash Course Economics

The video explores different market structures, focusing on perfect competition, monopolistic competition, oligopolies, and monopolies. It explains how these markets operate, their characteristics, and the role of game theory in strategic decision-making. The video also discusses non-price competition, collusion, and cartels, using examples like fast food chains and tech companies. It highlights the importance of advertising and the challenges of maintaining collusion. The concept of a payoff matrix and dominant strategies in oligopolies is explained, emphasizing the complexity of business decisions.

Which market structure is characterized by many producers and low barriers to entry, with products that are similar but not identical?

• Perfect competition

• Monopolistic competition

• Oligopoly

• Monopoly

In an oligopoly, how do companies typically compete without changing their prices?

• Through price wars

• By lowering production costs

• Through non-price competition

• By increasing the number of products

What is the prisoner's dilemma an example of in game theory?

• A strategy that always results in a tie

• A game where both players always win

• A scenario where individual rationality leads to a suboptimal outcome

• A situation where cooperation leads to the worst outcome

What is a cartel?

• A single company dominating a market

• A group of companies conspiring to set prices

• A market with no barriers to entry

• A type of non-price competition

What is price leadership?

• When a company sets a price and others follow

• When companies agree to set the same price

• When a company lowers its price to drive out competitors

• When a company raises its price to increase profits

Which of the following is an example of a legal cartel?

• The airline industry

• OPEC

• The fast food industry

• The smartphone market

What is a dominant strategy in game theory?

• A strategy that leads to a draw

• A strategy that changes based on the opponent's move

• A strategy that is best regardless of what the other player does

• A strategy that always results in a win