earn higher profits makes it extremely tempting to defy the law.

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10 • Key Terms 253

Key Terms

cartel a group of firms that collude to produce the monopoly output and sell at the monopoly price

collusion when firms act together to reduce output and keep prices high

differentiated product a product that consumers perceive as distinctive in some way

duopoly an oligopoly with only two firms

game theory a branch of mathematics that economists use to analyze situations in which players must make

decisions and then receive payoffs based on what decisions the other players make

imperfectly competitive firms and organizations that fall between the extremes of monopoly and perfect

competition

kinked demand curve a perceived demand curve that arises when competing oligopoly firms commit to

match price cuts, but not price increases

monopolistic competition many firms competing to sell similar but differentiated products
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