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Econ definitions (chapter 14 )

Terms

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comparative advantage
Superior efficiency on a relative basis
competitive advantage
Unique or rare ability to create, distribute, or service products valued by customers
customer lock-in effect
Benefit from establishing durable customer loyalty
dominant strategy
Decision that gives the best result for either party regardless of the action taken by the other
end-of-game problem
Difficulty tied to inability to punish or reward final-period behavior
equilibrium outcome
Payoff allocation that cannot be improved by unilateral action
finitely repeated game
Game that occurs only a limited number of times, or has limited duration in time
first-mover advantage
Benefit earned by the player able to make the initial move in a sequential move or multistage game
game-theory strategy
Game-theory plan of action designed to achieve a specific goal
infinitely repeated game
Game that is repeated over and over again without boundary or limit
limit pricing
Strategy to set less than monopoly prices in an effort to deter market entry by new and viable competitors
market penetration pricing
Strategy of charging very low initial prices to create a new market or grab market share
multistage games
Games where payoffs and strategy are shaped by the order in which various players make their moves
Nash bargaining
Where two competitors haggle over some item of value
Nash equilibrium
Set of decision strategies where no player can improve through a unilateral change in strategy
network externalities
Benefit in consumption of production tied to widespread adoption of a physical or economic standard
nonprice competition
Competitive techniques tied to product quality, innovation, promotion, etc.
one-shot game
One-time interaction
payoff matrix
Player rewards from selected strategies
predatory pricing
Pricing below marginal cost to knock out rivals and subsequently raising prices to obtain monopoly profits
Prisoner’s Dilemma
Famous simultaneous-move one-shot game showing that counter-part uncertainty leads to suboptimal outcome
randomized strategies
Haphazard actions to keep rivals from being able to predict strategic moves
repeated game
Ongoing interaction
secure strategy
Decision that guarantees the best possible outcome given the worst possible scenario
simultaneous-move game
Players move without specific knowledge of countermoves by other players
trigger strategy
System of behavior that remains the same until another player takes some course of action that precipitates a different response

Deck Info

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