An imperfectly competitive firm faces a down-sloping demand curve. Its output price reflects the quantity of goods it makes and sells.

An oligopoly is an industry with few producers, each recognizing their interdependence. An industry with monopolistic competition has many sellers of products that are close substitutes for one another. Each firm has only a limited ability to affect its output price.

A natural monopoly enjoys such scale economies that it has no fear of entry by others.

Minimum efficient scale is the lowest output at which a firm’s LAC curve stops falling.

The N-firm concentration ratio is the market share of the largest N firms in the industry.

Globalization is the closer integration of markets across countries. Multinationals are firms operating in many countries simultaneously.

In monopolistic competition, in the long-run tangency equilibrium each firm’s demand curve just touches its AC curve at the output level at which MC equals MR. Each firm maximizes profits but just breaks even. There is no more entry or exit.

Collusion is an explicit or implicit agreement to avoid competition.

A game is a situation in which intelligent decisions are necessarily interdependent.

A strategy is a game plan describing how a player acts, or moves, in each possible situation.

In Nash equilibrium, each player chooses the best strategy, given the strategies being followed by other players.

A dominant strategy is a player’s best strategy whatever the strategies adopted by rivals.

A commitment is an arrangement, entered into voluntarily, that restricts future actions.

A credible threat is one that, after the fact, is still optimal to carry out.

In the Cournot model, each firm treats the output of the other firm as given.

A firm’s reaction function shows how its optimal output varies with each possible action by its rival.

Nash equilibrium is where the two reaction functions intersect.

In the Bertrand model of oligopoly, each firm treats the prices of rivals as given.

In the Stackelberg model, firm B can observe the output already fixed by firm A. In choosing output, firm A must thus anticipate the subsequent reaction of firm B.

A first-mover advantage means that the player moving first achieves higher payoffs than when decisions are simultaneous.

A contestable market has free entry and free exit.

An innocent entry barrier is one not deliberately erected by incumbent firms.

A strategic move is one that influences the other person’s choice, in a manner favourable to oneself, by affecting the other person’s expectations of how one will behave.

Strategic entry deterrence is behaviour by incumbent firms to make entry less likely.