Oligopoly: Competition Among the Few

Read the pages in this section. Take a moment to read through the stated learning outcomes for this chapter of the text, which should be your goals as you read through the chapter. Attempt the "Try It" problems at the end of the section before checking your answers.

1. Oligopoly: Competition Among the Few

1.2. Answers to Try It! Problems

  1. North Airlines seems to be practicing a price strategy known in game theory as tit-for-tat.
  2. The banks could be engaged in tacit collusion, with Bank A as the price leader.
  3. Saudi Arabia appears to have used a trigger strategy, another aspect of game theory. In general, of course, participants hope they will never have to "pull" the trigger, because doing so harms all participants. After years of cheating by other OPEC members, Saudi Arabia did undertake a policy that hurt all members of OPEC, including itself; OPEC has never since regained the prominent role it played in oil markets.
  4. Saudi Arabia seems to be trying to create another oil cartel, a form of overt collusion.