# Microeconomics FHS

## Can you name the Microeconomics FHS?

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Measure of industry concentration
When one lottery pays at least as well as another in every state and better in at least one state
With risk, we can __ probabilities, with uncertainty we are __
Any feasible payoff pair giving each player at least her stage game eqn payoff can be supported as SPE if delta is high enough
Crucially, threats such as limit pricing must be __ in order to deter entry
Steep loss function? Use a _
Investment by an incumbent changes the rules of (market entry) game
__ axiom of EUT: If A>B>C then A>C
When each stage game of a multi-stage game constitutes a Nash equilibrium
__ equilibrium cannot exist in insurance market with high risks and low risks
__ axiom of EUT: If A>B>C then there must be some weighted average of A and C that is equally preferable to B
Demonstrated screening: where the uninformed takes action to improve what they know
__ axiom of EUT: two gambles mixed with a third maintain the same preference order
Rabin concludes that we should reject EUT for __ stakes
A higher frequency of sales __ the chance of collusion
Rabin critique of concave utility: If an EU maximiser rejects a 50/50 between \$100 loss and \$_ gain then they must reject 50/50 between \$_ loss and \$_ gain
If people adhere to rationality (in _ choice theory) over _ probabilities then expected utility analysis remains valid.
Public goods might have to be provided through __ tax on other markets
The idea that a mean preserving spread is disliked
Invested in a £3bn battery factory
Outlined signalling: the informed party takes action to credibly convey information about themself
(2004) efficiency gains can offset the costs of lower competition
When the outcomes of a risky project are shared amongst people
In carbon policy, a __ is preferred to a __ because of the steep loss function
EUT neglects __ probability: which is the state of real life lotteries and uncertainty
Showed that it is unrealistic to expect the same utility function to be appropriate for all levels of wealth
_ Paradox: Flip a coin as many times until tails - receive 2^no.ofheads. Expected value is infinite but few would pay more than around 25 dollars.
EUT lacks a distinction between __ and __
Coordination difficulties __ the chance of collusion
__ axiom of EUT: any two lotteries can be compared
A set of prices where (amongst other things) supply = demand for every good.
In an infinite game, a mixed Bertrand strategy can even produce higher profits than Cournot
e.g. congestion, agglomeration
SPE rules out __ threats to entry
Leniency programs __ the chance of collusion
An agent is risk averse if and only if their utility of wealth curve is c__
Decisions around uncertainty are influenced by framing
Firms are endowed with a tradeable carbon license that diminishes by __% every year
Allais' paradox represents the __ effect.
Mergers have __ and __ effects on competition.
Defined coefficients of risk aversion
Demonstrated adverse selection in market for lemons
Cap and trade presents __ problems for small companies
When a group of people agree to share in the outcomes of multiple risky projects
A higher real interest rate __ the chance of collusion
A specification of probabilities with which to choose between pure strategies
Pioneers subjective choice theory
Mergers that lead to a 'substantial lessening of competition' are banned under the 2002 __ __
A higher ease of detecting deviation __ the chance of collusion
Subjective choice theory requires a known number of _ of the world
Empirically showed that the correlation between wages and education is highest when productivity is hard to observe
Prospect Theory/loss aversion
A higher number of firms in a market __ the chance of collusion
The same lottery might be preferred if the results can be known now rather than later to reduce __
A set of strategies where each is the best response to the other
Shallow loss function? Use a _
Even if EUT is criticised, it might be the best description of __ decision making
Method of finding out marginal benefits of public gods
P_ P_ indicates collusion (Rees, 1993)
__ absolute risk aversion reflects the fact that gambles over say \$100 should become more appealing as we get richer
Adverse selection in the market for loans (_ _)
Complete specification of what to do whenever a choice could have to be made
Found consumer choices (in experiments) that systematically undermined EUT
Test of industry boundaries - if a small but significant price increase would be profitable then substitutes are not a barrier to monopolism
A strategy that is a best response to whatever others choose
What makes people happy is relative prosperity - undermines EUT
A weakness of EUT is that it treats __ as __ risk
Developed the expected utility model
Deal or no Deal shows consumers have path dependent risk attitudes
__ axiom of EUT can be undermined by portfolio theory
Rothschild-Stiglitz separating equilibrium does not exist if proportion of __ risk types is too high
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Last Updated: Feb 16, 2017

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