Chapter 5

Question 1

What is a competitor?

Answer 1

Competitors are the firms whose strategic choices directly affect one another

Question 2

What is SSNIP

Answer 2

small but significant nontransitory increase in price
used in a post-merger environment
The SSNIP criterion is based on the economic concept of substitutes.

Question 3

What are close substitutes

Answer 3

1. They have the same or similar product performance characteristics.
2. They have the same or similar occasions for use.
3. They are sold in the same geographic market.

Question 4

how to approach Competitor Identification

Answer 4

Cross-price elasticity indicates that consumers increase their purchases of good Y as the price of good X increases.
Procentuele verandering in Q bij Y gedeeld door procentuele verandering in P door X

Question 5

What is the n-firm ratio

Answer 5

Calculation of the top n market shares

Question 6

What is the Herfindahl index

Answer 6

Equals the sum of the squared market shares of all the firms in the market.
< .2 perfect competition
< .2 monopolistic competition
.2 to .6 oligopoly
> .6 monopoly

Question 7

When will market conditions will tend to drive down prices

Answer 7

1. There are many sellers.
2. Consumers perceive the product to be homogeneous.
3. There is excess capacity.

Question 8

What is excess capacity

Answer 8

Where a company or industry has the ability to produce more goods or services than it is currently producing, but it is not doing so

Question 9

What is monopolistic competition

Answer 9

1. There are many sellers.
2. Each seller offers a differentiated product

Question 10

What are horizontally different products?

Answer 10

Pepsi and cola