| A | B |
|---|
| Product Differentiation | a strategy in which one firm's product is distinguished from competing products by means of its design, related services, quality, location, or other attributes (except price) |
| nonprice competition | competition based on distinguishing one's product by means of product differentiation and then advertising the distinguished product to consumers. |
| excess capacity | plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost. |
| price leadership | an informal method that firms in an oligopoly may employ to set the price of their product: One firm (the leader) is the first to announce a change in price, and the other firms (the followers) soon announce identical or similar changes. |
| homogeneous oligopoly | an oligopoly in which the firms produce a standardized product |
| differentiated oligopoly | an oligopoly in which the firms produce a differentiated product |
| mutual interdependence | a situation in which a change in price stategy (or in some other stategy) by one firm will affect the sales and profits of another firm (or other firms). Any firm that makes such a change can expect the other rivals to react to the change. |
| concentration ratio | the percentage of the total sales of an industry made by the four (oer some other number) largest sellers in a group. |
| interindustry competition | the competition for sales between the products of one industry and the products of another industry. |
| import competition | the competition that domestic firms encounter from the products and services of foreign producers. |
| Herfindahl index | a measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry |
| game-theory model | a means of analyzing the pricing behavior of oligopolists that uses the theory of strategy associated with games such as chess and bridge. |
| collusion | a situation in which firms act together and in agreement (collude) to fix prices, divide a market, or otherwise restrict competition |
| kinked-demand curve | the demand curve for a noncollusive oligopolist, which is based on the assumption that rivals will follow a price decrease and will ignore a price increase |
| price war | successive and continued decreases in the prices charged by firms in an oligopolistic industry. Each firm lowers its price below rivals' prices, hoping to increase its sales abd revenues at its rivals' expanse. |
| cartel | a formal agreement amoung firms (or countries) in an industry to set the price of a product and establish the outputs of the individual firms (or countries) or to divide the market for the product geographically |
| tacit understandings | agreements in which firms reach a verbal understanding on product price, leaving market shares to be decided by nonprice competition. violation of antitrust laws |
