Common kinked-demand model

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1. If the 4 firm concentration ratio of an industry is 75%, what does it mean?

2. Explain in Game Theory how payoff matrices used? Exemplify communal interdependence among firms in oligopolies. To predict likely outcomes, how can they be used?

3. Explain, using the prisoners' dilemma analysis, why cooperation can be mutually beneficial, but if conditions prevent cooperation or collusion from happening, the outcome is worse for both parties.

4. Elucidate the common kinked-demand model? In the oligopolist's marginal-revenue curve, elucidate the reason for gap. In this model explain how does price rigidity in oligopoly?

5. Why is advertising prevalent in many oligopolies, especially when industry demand is inelastic? Illustrate your answer by assuming that with advertising, a firm's demand curve has price elasticity of -1.5 and without advertising, it is -2. If MC is $10, what is the difference in the profit-maximizing price?

Reference no: EM136889

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