Oligopoly: Introduction. Oligopoly. Oligopoly Models. Oligopoly: Analysis. ECON 370: Microeconomic Theory Summer 2004 Rice University Stanley Gilbert


 Augustine Morton
 1 years ago
 Views:
Transcription
1 Oligopoly: Introduction Oligopoly ECON 370: Microeconomic Theory Summer 00 Rice University Stanley Gilbert Alternative Models of Imperfect Competition Monopoly and monopolistic competition Duopoly  two firms in industry Oligopoly  a few (> ) firms in industry Essential Features Nature of interaction between firms (beyond those captured in price) is essence of theories No single grand theory Econ Oligopoly Oligopoly: Analysis Simplest Model of Oligopoly: Duopoly Assume only two firms (to limit interactions) Assume homogeneous output No product differentiation Single market price No competition in quality Equilibrium: Solve for output, price of each firm Oligopoly Models We use Game Theory to model strategic behavior Strategic Behavior takes into account how others will react to one s actions Noncooperative simultaneous games Simultaneously choose quantities (or prices) Noncooperative sequential games Quantity (or price) leader (dominant/barometric firm) Quantity (or price) follower Cooperative games Collusion  jointly set quantities (or prices) Econ Oligopoly 3 Econ Oligopoly
2 Quantity Competition: Introduction Assume firms choose output and allow prices to adjust to clear markets Each firm chooses output to max profits, given output level of competitor Firms compete in outputs Firm : y units; Firm : y units total quantity supplied is y + y market price will be p(y + y ) total cost functions are c (y ) and c (y ) Quantity Competition: Profits Firm maximizes profit, given y Firm profit function: π (y ; y ) p(y + y ) y c(y ) Firm Reaction Function What output y maximizes firm profit? Given y (expected or observed) Solve for reaction function y f(y ) Econ Oligopoly 5 Econ Oligopoly 6 Quantity Competition: Example Let market inverse demand function be p(y T ) 60 y T y T y + y Let firms (different) total cost functions be c (y ) y c (y ) 5y + y Example: Firm Firm profit function is π (y ; y ) (60 y y )y y So, given y, solve for firm profitmaximizing y π 60 y y y 0 y Firm s reaction function (best response) is y R(y) 5 y Econ Oligopoly 7 Econ Oligopoly 8
3 y 60 Graph: Firm Firm s Reaction Curve R (y ) y R ( y) 5 y ( ory 60 y) Example: Firm Similarly, given y, Firm s profit function is π ( y ; y ) (60 y y )y 5y y To get Firm s profitmaximizing output π 60 y y 5 y 0 y 5 y Firm s reaction function (best response) is 5 y y ( ) R y Econ Oligopoly 9 Econ Oligopoly 0 Graph: Firm Equilibrium 5/ y Firm s Reaction Curve R (y ) 5 y y ( ) R y 5 y Equilibrium is a CournotNash equilibrium Each firm s output level is best response to other firm s output level Stable: neither firm wants to change output Thus, (y *, y * ) such that y * R (y * ) and y * R (y * ) Essentially solving a pair of simultaneous equations Econ Oligopoly Econ Oligopoly 3
4 * * * y R ( y ) 5 y Equilibrium * y * * 5 y R ( ) y Graph: Equilibrium Substitute for y * to get * * 5 y * y 5 y 3 y 60 * 5 3 y 8 5/ Equilibrium CournotNash equilibrium is (y *, y * ) (3, 8) 5 5 y Econ Oligopoly 3 Econ Oligopoly Cournot v Monopoly Price Less than monopoly Greater than perfect competition Quantity Greater than monopoly Less than perfect competition Total profit Less than monopoly Greater than perfect competition Price Competition: Bertrand Games Alternative strategic behavior Firms compete using only price (not quantity) Bertrand games Simultaneous game Firms use price as strategic variable Get results dramatically different from quantity competition Econ Oligopoly 5 Econ Oligopoly 6
5 Bertrand Games: Introduction Example of Bertrand game Each firm s MC c, constant All firms simultaneously set their prices Nash Equilibrium: All firms set p c All firms have same p, or high p loses all sales Any p > c, slight price reduction yields big profit Any p < c, lose money Sequential games Sequential Games One firm (larger firm) moves first Then follower firms react Both consider reactions of other Can compete in Quantity von Stackelberg Model Price Price leadership models Econ Oligopoly 7 Econ Oligopoly 8 The von Stackelberg Model Outputs are strategic variables Firm leader firm chooses y first Firm follower then reacts Leader anticipates reaction of follower (doesn t assume y constant as in CN) Issues What are prices, outputs, profits Is there a first mover advantage? The von Stackelberg Model Follower firm will choose y to maximize profit, given leader firm y (CN assumption) Thus, follower reaction function: y R (y ) Leader firm () anticipates follower firm s () reaction function, so chooses y to max profit π s (y ) p[y + R (y )]y c (y ) Econ Oligopoly 9 Econ Oligopoly 0 5
6 Von Stackelberg Game: Profits Note: leader firm makes a profit at least as large as CournotNash profit Can always choose y CN output Follower will respond with y CN output So, can at least achieve CN profit Return to duopoly example w / different MC s Leader firm has lower costs c (y ) y Follower firm has higher costs c (y ) 5y + y Von Stackelberg Game: Example Same characteristics as before Market inverse demand function is p 60 y T The firms cost functions are c (y ) y and c (y ) 5y + y Firm is follower, with reaction function 5 y y ( ) R y Econ Oligopoly Econ Oligopoly Von Stackelberg Game: Example Leader s profit function is π [ y R ( y )] y s ( y ) 60 y 5 y 60 y y y 95 7 y y For a profitmaximum, first order condition is 95 7 y y s 3.9 Von Stackelberg Game: Example Follower firm s response to y 3.9 is y s s R(y) 7.8 Recall CN outputs are (y *, y * ) (3,8) So leader produces more than CN output, follower produces less than its CN output First mover advantage to leader (but modest because leader also has cost advantage) Econ Oligopoly 3 Econ Oligopoly 6
7 Sequential Price Games: Introduction Priceleadership Sequential game Priceleader firm sets its price Typically large, respected firm Dominant firm Barometric firm Follower firms usually smaller react to leader Note: Follower firms are price takers Analogous to competitive firms Price Leadership Market demand function is D(p) Given leader price p, follower firms supply Y f (p), anticipated by leader So leader gets residual demand L(p) D(p) Y f (p) Leader s chooses p to max profit π L (p) p[d(p)  Y f (p)] c L [D(p)  Y f (p)] Econ Oligopoly 5 Econ Oligopoly 6 Price Leadership Results Followers act as competitors PMC Economic profit of each is zero Leader acts as monopolist w/ residual demand MR L MC L Only leader earns monopoly profits Cooperative Behavior: Collusion Collusion is illegal in US But not for international cartels OPEC Bauxite, copper, tin, coffee, tea, mercury, iodine Goal of cartel: Joint profit maximization Can achieve (joint) monopoly profits Must divide among cartel members If cartel is part of market, like dominant firm model Econ Oligopoly 7 Econ Oligopoly 8 7
8 Cooperative Behavior: Collusion Fundamental tension for cartels Stability: Higher profits (share of joint max) Instability Successful cartel has p >> MC One member alone faces nearly fixed p Gets huge profits if lowers own price while others hold price constant (cheat on agreement) Cooperative Behavior: Collusion Factors that promote cartel cohesion Similar costs, expectations of demand, motives so can agree on strategy Inelastic demand so potential profits large (disincentive for cheating) Inelastic demand in LR so profits maintained Little expansion of supply by nonmembers in LR Econ Oligopoly 9 Econ Oligopoly 30 8
Price competition with homogenous products: The Bertrand duopoly model [Simultaneous move price setting duopoly]
ECON9 (Spring 0) & 350 (Tutorial ) Chapter Monopolistic Competition and Oligopoly (Part ) Price competition with homogenous products: The Bertrand duopoly model [Simultaneous move price setting duopoly]
More informationOligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output.
Topic 8 Chapter 13 Oligopoly and Monopolistic Competition Econ 203 Topic 8 page 1 Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry
More informationBertrand with complements
Microeconomics, 2 nd Edition David Besanko and Ron Braeutigam Chapter 13: Market Structure and Competition Prepared by Katharine Rockett Dieter Balkenborg Todd Kaplan Miguel Fonseca Bertrand with complements
More informationC H A P T E R 12. Monopolistic Competition and Oligopoly CHAPTER OUTLINE
C H A P T E R 12 Monopolistic Competition and Oligopoly CHAPTER OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition versus Collusion: The Prisoners Dilemma 12.5
More informationChapter 9 Basic Oligopoly Models
Managerial Economics & Business Strategy Chapter 9 Basic Oligopoly Models McGrawHill/Irwin Copyright 2010 by the McGrawHill Companies, Inc. All rights reserved. Overview I. Conditions for Oligopoly?
More informationManagerial Economics & Business Strategy Chapter 9. Basic Oligopoly Models
Managerial Economics & Business Strategy Chapter 9 Basic Oligopoly Models Overview I. Conditions for Oligopoly? II. Role of Strategic Interdependence III. Profit Maximization in Four Oligopoly Settings
More informationChapter 14. Oligopoly and Monopolistic Competition. Anyone can win unless there happens to be a second entry. George Ade
Chapter 14 Oligopoly and Monopolistic Competition Anyone can win unless there happens to be a second entry. George Ade Chapter 14 Outline 14.1 Market Structures 14.2 Cartels 14.3 Noncooperative Oligopoly
More informationSolution to Selected Questions: CHAPTER 12 MONOPOLISTIC COMPETITION AND OLIGOPOLY
Chulalongkorn University: BBA International Program, Faculty of Commerce and Accountancy 900 (Section ) Chairat Aemkulwat Economics I: Microeconomics Spring 05 Solution to Selected Questions: CHAPTER MONOPOLISTIC
More informationOligopoly and Strategic Pricing
R.E.Marks 1998 Oligopoly 1 R.E.Marks 1998 Oligopoly Oligopoly and Strategic Pricing In this section we consider how firms compete when there are few sellers an oligopolistic market (from the Greek). Small
More informationMicroeconomics. Lecture Outline. Claudia Vogel. Winter Term 2009/2010. Part III Market Structure and Competitive Strategy
Microeconomics Claudia Vogel EUV Winter Term 2009/2010 Claudia Vogel (EUV) Microeconomics Winter Term 2009/2010 1 / 25 Lecture Outline Part III Market Structure and Competitive Strategy 12 Monopolistic
More informationChapter 12 Monopolistic Competition and Oligopoly
Chapter Monopolistic Competition and Oligopoly Review Questions. What are the characteristics of a monopolistically competitive market? What happens to the equilibrium price and quantity in such a market
More informationMarket Structure: Duopoly and Oligopoly
WSG10 7/7/03 4:24 PM Page 145 10 Market Structure: Duopoly and Oligopoly OVERVIEW An oligopoly is an industry comprising a few firms. A duopoly, which is a special case of oligopoly, is an industry consisting
More informationEconomics 203: Intermediate Microeconomics I Lab Exercise #11. Buy Building Lease F1 = 500 F1 = 750 Firm 2 F2 = 500 F2 = 400
Page 1 March 19, 2012 Section 1: Test Your Understanding Economics 203: Intermediate Microeconomics I Lab Exercise #11 The following payoff matrix represents the longrun payoffs for two duopolists faced
More informationMicroeconomic Analysis
Microeconomic Analysis Oligopoly and Monopolistic Competition Ch. 13 Perloff Topics Market Structures. Cartels. Noncooperative Oligopoly. Cournot Model. Stackelberg Model. Comparison of Collusive, Cournot,
More informationNew Technology and Profits
Another useful comparative statics exercise is to determine how much a firm would pay to reduce its marginal costs to that of its competitor. This will simply be the difference between its profits with
More information12 Monopolistic Competition and Oligopoly
12 Monopolistic Competition and Oligopoly Read Pindyck and Rubinfeld (2012), Chapter 12 09/04/2015 CHAPTER 12 OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition
More informationNonuniform Pricing Oligopoly Cournot Bertrand. Oligopoly Chapter 27
Oligopoly Chapter 27 Other Kinds of Nonuniform Pricing Twopart tariffs: lumpsum fee + constant price per unit Tiein sales: can buy one product only if you buy another one as well Requirement tiein
More informationUniversity of Hong Kong ECON6021 Microeconomic Analysis Oligopoly
1 Introduction University of Hong Kong ECON6021 Microeconomic Analysis Oligopoly There are many real life examples that the participants have nonnegligible influence on the market. In such markets, every
More informationOligopoly. Models of Oligopoly Behavior No single general model of oligopoly behavior exists. Oligopoly. Interdependence.
Oligopoly Chapter 162 Models of Oligopoly Behavior No single general model of oligopoly behavior exists. Oligopoly An oligopoly is a market structure characterized by: Few firms Either standardized or
More information5.3 Oligopoly (continued)
5.3 Oligopoly (continued) 5.3.5 Collusion and Game Theory Collusion occurs when oligopoly firms make joint decisions, and act as if they were a single firm. Collusion requires an agreement, either explicit
More informationMarket Structures: Noncooperative Oligopoly
Market Structures: Noncooperative Oligopoly Carlton & Perloff Chapter 6 Prof. Dr. Murat Yulek Some taxonomy From the perspective of the consumers: Best: competitive Oligopoly stands in between competitive
More informationUnit 8. Firm behaviour and market structure: monopolistic competition and oligopoly
Unit 8. Firm behaviour and market structure: monopolistic competition and oligopoly Learning objectives: to understand the interdependency of firms and their tendency to collude or to form a cartel; to
More informationPrinciples of Microeconomics Review D22D29 Xingze Wang, Ying Hsuan Lin, and Frederick Jao (2007)
Principles of Microeconomics Review DD Xingze Wang, Ying Hsuan Lin, and Frederick Jao (). Principles of Microeconomics, Fall ChiaHui Chen November, Lecture Monopoly Outline. Chap : Monopoly. Chap : Shift
More informationMikroekonomia B by Mikolaj Czajkowski. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Mikroekonomia B by Mikolaj Czajkowski Test 12  Oligopoly Name Group MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The market structure in which
More informationOligopoly. What Is Oligopoly? What is Oligopoly?
CHAPTER 13B After studying this chapter you will be able to Oligopoly Define and identify oligopoly Explain two traditional oligopoly models Use game theory to explain how price and output are determined
More informationINDUSTRIAL ECONOMICS COMPONENT: THE INTERACTIVE TEXTBOOK
UNIT EC407, LEVEL 2 INDUSTRIAL ECONOMICS COMPONENT: THE INTERACTIVE TEXTBOOK Semester 1 1998/99 Lecturer: K. Hinde Room: 427 Northumberland Building Tel: 0191 2273936 email: kevin.hinde@unn.ac.uk Web Page:
More informationThe Basics of Game Theory
Sloan School of Management 15.010/15.011 Massachusetts Institute of Technology RECITATION NOTES #7 The Basics of Game Theory Friday  November 5, 2004 OUTLINE OF TODAY S RECITATION 1. Game theory definitions:
More informationWeek 7  Game Theory and Industrial Organisation
Week 7  Game Theory and Industrial Organisation The Cournot and Bertrand models are the two basic templates for models of oligopoly; industry structures with a small number of firms. There are a number
More information1. Suppose demand for a monopolist s product is given by P = 300 6Q
Solution for June, Micro Part A Each of the following questions is worth 5 marks. 1. Suppose demand for a monopolist s product is given by P = 300 6Q while the monopolist s marginal cost is given by MC
More information3.2. Cournot Model. Matilde Machado
Matilde Machado 1 Assumptions: All firms produce an homogenous product The market price is therefore the result of the total supply (same price for all firms) Firms decide simultaneously how much to produce
More informationChapter 13 Oligopoly 1
Chapter 13 Oligopoly 1 4. Oligopoly A market structure with a small number of firms (usually big) Oligopolists know each other: Strategic interaction: actions of one firm will trigger reactions of others
More informationCHAPTER 6 MARKET STRUCTURE
CHAPTER 6 MARKET STRUCTURE CHAPTER SUMMARY This chapter presents an economic analysis of market structure. It starts with perfect competition as a benchmark. Potential barriers to entry, that might limit
More informationEC508: Microeconomic Theory Midterm 3
EC508: Microeconomic Theory Midterm 3 Instructions: Neatly write your name on the top right hand side of the exam. There are 25 points possible. Your exam solution is due Tuesday Nov 24, 2015 at 5pm. You
More informationPreTest Chapter 23 ed17
PreTest Chapter 23 ed17 Multiple Choice Questions 1. The kinkeddemand curve model of oligopoly: A. assumes a firm's rivals will ignore a price cut but match a price increase. B. embodies the possibility
More informationModels of Imperfect Competition
Models of Imperfect Competition Monopolistic Competition Oligopoly Models of Imperfect Competition So far, we have discussed two forms of market competition that are difficult to observe in practice Perfect
More informationMODULE 64: INTRODUCTION TO OLIGOPOLY Schmidty School of Economics. Wednesday, December 4, 2013 9:20:15 PM Central Standard Time
MODULE 64: INTRODUCTION TO OLIGOPOLY Schmidty School of Economics Learning Targets I Can Understand why oligopolists have an incentive to act in ways that reduce their combined profit. Explain why oligopolies
More informationLecture 12: Imperfect Competition
Lecture 12: Imperfect Competition Readings: Chapters 14,15 Q: How relevant are the Perfect Competition and Monopoly models to the real world? A: Very few real world business is carried out in industries
More informationLecture 11: Oligopoly and Strategic Behavior
Lecture 11: Oligopoly and Strategic Behavior Few Firms in the Market: Each aware of others actions Each firm in the industry has market power Entry is Feasible, although incumbent(s) may try to deter it.
More informationEconomics 100A Prof. McFadden Fall 2001 Due the week of 11/26/01. Answer Key to Problem Set #11
Economics 100 Prof. McFadden Fall 01 Due the week of 11/26/01 nswer Key to Problem Set #11 1. Currently, there is an incumbent monopoly in the market. Next year, a potential entrant may. The incumbent
More informationLecture 7 Markets with market power. (Please note that there is no Part II of Lecture 6)
Lecture 7 Markets with market power (Please note that there is no Part II of Lecture 6) Four idealized types of market structure Perfect competition: many sellers; they are selling an identical product
More informationMarket Structure. Market Structure and Behaviour. Perfect competition. PC firm output
Market Structure Market Structure and Behaviour See chapters 1012 in Mansfield et al Market: firms and individuals buy and sell Important social and legal preconditions Different structures depending
More informationUNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition
UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on
More informationPrepared by Katharine Rockett Dieter Balkenborg Todd Kaplan Miguel Fonseca
Microeconomics, 2 nd Edition David Besanko and Ron Braeutigam Chapter 13: Market Structure and Competition Prepared by Katharine Rockett Dieter Balkenborg Todd Kaplan Miguel Fonseca Market structures differ
More informationQuick Review. Chapter 15: Figure 1 The Four Types of Market Structure
Chapter 16: Oligopoly Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly and do not face so much competition that they are price takers. Types
More informationNONCOOPERATIVE OLIGOPOLY MODELS
NONCOOPERATIVE OLIGOPOLY MODELS 1. INTRODUCTION AND DEFINITIONS Definition 1 (Oligopoly). Noncooperative oligopoly is a market where a small number of firms act independently but are aware of each other
More informationCooleconomics.com Monopolistic Competition and Oligopoly. Contents:
Cooleconomics.com Monopolistic Competition and Oligopoly Contents: Monopolistic Competition Attributes Short Run performance Long run performance Excess capacity Importance of Advertising Socialist Critique
More informationBasics of Game Theory
Basics of Game Theory Giacomo Bacci and Luca Sanguinetti Department of Information Engineering University of Pisa, Pisa, Italy {giacomo.bacci,luca.sanguinetti}@iet.unipi.it April  May, 2010 G. Bacci and
More informationEconomics II: Micro Fall 2009 Exercise session 5. Market with a sole supplier is Monopolistic.
Economics II: Micro Fall 009 Exercise session 5 VŠE 1 Review Optimal production: Independent of the level of market concentration, optimal level of production is where MR = MC. Monopoly: Market with a
More informationUNIT 6. Pricing under different market structures. Perfect Competition
UNIT 6 ricing under different market structures erfect Competition Market Structure erfect Competition ure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on the scale, the
More informationChapter 7 Monopoly and Oligopoly
Chapter 7 Monopoly and Oligopoly Multiple Choice Questions Choose the one alternative that best completes the statement or answers the question. 1. Assume that in order to sell 10 more units of output
More informationLesson 13 Duopoly. c 2010, 2011 Roberto Serrano and Allan M. Feldman All rights reserved Version C
Lesson 13. Duopoly 1 Lesson 13 Duopoly c 2010, 2011 Roberto Serrano and Allan M. Feldman All rights reserved Version C 1. Introduction In this lesson, we study market structures that lie between perfect
More informationECON 312: Oligopolisitic Competition 1. Industrial Organization Oligopolistic Competition
ECON 312: Oligopolisitic Competition 1 Industrial Organization Oligopolistic Competition Both the monopoly and the perfectly competitive market structure has in common is that neither has to concern itself
More informationFigure: Computing Monopoly Profit
Name: Date: 1. Most electric, gas, and water companies are examples of: A) unregulated monopolies. B) natural monopolies. C) restrictedinput monopolies. D) sunkcost monopolies. Use the following to answer
More informationCHAPTER 13 GAME THEORY AND COMPETITIVE STRATEGY
CHAPTER 13 GAME THEORY AND COMPETITIVE STRATEGY EXERCISES 3. Two computer firms, A and B, are planning to market network systems for office information management. Each firm can develop either a fast,
More informationNorthern University Bangladesh
Northern University Bangladesh Managerial Economics ( MBA 5208) Session # 09 Oligopoly & Monopolistic Competition Prof. Mahmudul Alam (PMA) 23 September, 2011 (Friday) 1 1. Monopolistic Competition & Oligopoly
More informationChapter 7: Market Structures Section 3
Chapter 7: Market Structures Section 3 Objectives 1. Describe characteristics and give examples of monopolistic competition. 2. Explain how firms compete without lowering prices. 3. Understand how firms
More informationEcn 221  Unit 10 Monopolistic Competition & Oligopoly
Ecn 221  Unit 10 Monopolistic Competition & Oligopoly An industry characterized by monopolistic competition is similar to the case of perfect competition in that there are many firms, and entry into the
More informationMicroeconomics II. ELTE Faculty of Social Sciences, Department of Economics. week 9 MARKET THEORY AND MARKETING, PART 3
MICROECONOMICS II. ELTE Faculty of Social Sciences, Department of Economics Microeconomics II. MARKET THEORY AND MARKETING, PART 3 Author: Supervised by February 2011 Prepared by:, using Jack Hirshleifer,
More informationHow Does A Monopolistically Competitive Market Function?
How Does A Monopolistically Competitive Market Function? Perfect Competition Monopolistic Competition Oligopoly Pure Monopoly I. Characteristics of Monopolistic Competition: Relatively Large Number of
More informationLearning Objectives. Chapter 7. Characteristics of Monopolistic Competition. Monopolistic Competition. In Between the Extremes: Imperfect Competition
Chapter 7 In Between the Extremes: Imperfect Competition Learning Objectives List the five conditions that must be met for the existence of monopolistic competition. Describe the methods that firms can
More informationchapter: Oligopoly Krugman/Wells Economics 2009 Worth Publishers 1 of 35
chapter: 15 >> Oligopoly Krugman/Wells Economics 2009 Worth Publishers 1 of 35 WHAT YOU WILL LEARN IN THIS CHAPTER The meaning of oligopoly, and why it occurs Why oligopolists have an incentive to act
More informationRecap from last Session Determination of price and output in the short/long run Non Price Competition
31 : Oligopoly 1 Recap from last Session Determination of price and output in the short/long run Non Price Competition Session Outline Features of Oligopoly Noncollusive models of oligopoly Non price
More informationCompetition and Regulation. Lecture 2: Background on imperfect competition
Competition and Regulation Lecture 2: Background on imperfect competition Monopoly A monopolist maximizes its profits, choosing simultaneously quantity and prices, taking the Demand as a contraint; The
More informationFirm Supply: Market Structure & Perfect Competition
Firm Supply: Market Structure & Perfect Competition Firm Supply How does a firm decide how much to supply at a given price? This depends upon the firm s goals; technology; market environment; and competitors
More informationBETWEEN MONOPOLY AND PERFECT COMPETITION. Oligopoly BETWEEN MONOPOLY AND PERFECT COMPETITION
BETWEEN MONOPOLY AND PERFECT COMPETITION Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. Oligopoly Imperfect competition includes industries
More informationReview Test Ch 9, 10, 11 2
Review Test Ch 9, 10, 11 2 Student: 1. A onefirm industry is known as: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition. 2. Which of the following is not a basic characteristic
More informationChapter 7 Monopoly, Oligopoly and Strategy
Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are
More informationOligopoly: Duopoly : understanding Vodaphone and Digicel interactions
Oligopoly: Duopoly : understanding Vodaphone and Digicel interactions You have looked at the two extreme models of the market economy perfect competition at one end, and monopoly at the other. In the
More information1 Cournot Oligopoly with n firms
BEE07, Microeconomics, Dieter Balkenborg Cournot Oligopoly with n firms firmi soutput: q i totaloutput: q=q +q + +q n opponent soutput: q i =q q i =Σ j i q i constantmarginalcostsoffirmi: c i inverse demand
More informationBest Response Function: gives each player's payoffmaximizing strategy as a function of the other players' strategies.
OLIGOPOLY Readings Ch. 15 sections 14, Ch. 16 sections 110 1. A Little Bit of Game Theory Readings: Ch. 15 sections 14 A game consists of (at a minimum) players, strategies, and payoffs. The players
More information4. Market Structures. Learning Objectives 463. Market Structures
1. Supply and Demand: Introduction 3 2. Supply and Demand: Consumer Demand 33 3. Supply and Demand: Company Analysis 43 4. Market Structures 63 5. Key Formulas 81 2014 Allen Resources, Inc. All rights
More informationOligopoly: Firms in Less Competitive Markets
Chapter 13 Oligopoly: Firms in Less Competitive Markets Prepared by: Fernando & Yvonn Quijano 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O Brien, 2e. Competing with
More informationChapter 16 Oligopoly What Is Oligopoly?
Chapter 16 Oligopoly 16.1 What Is Oligopoly? 1) Sammy's Inc. competes with a few other firms because there are natural barriers to entry. Sammy's operates in A) a perfectly competitive market. B) an oligopoly.
More informationChapter 16 Monopolistic Competition and Oligopoly
Chapter 16 Monopolistic Competition and Oligopoly Market Structure Market structure refers to the physical characteristics of the market within which firms interact It is determined by the number of firms
More informationWeek 3: Monopoly and Duopoly
EC202, University of Warwick, Term 2 1 of 34 Week 3: Monopoly and Duopoly Dr Daniel Sgroi Reading: 1. Osborne Sections 3.1 and 3.2; 2. Snyder & Nicholson, chapters 14 and 15; 3. Sydsæter & Hammond, Essential
More informationChapter 9 Market Structure: Oligopoly
Economics for Managers by Paul Farnham Chapter 9 Market Structure: Oligopoly 9.1 Oligopoly A market structure characterized by competition among a small number of large firms that have market power, but
More informationWhich of the following is not characteristic of monopolistic competition?
ECON 190002 Chapter 9 Review Quiz & Key Which of the following is not characteristic of monopolistic competition? a) product differentiation b) a relatively large number of firms c) collusive agreements
More informationImperfect Competition
Chapter 13 Imperfect Competition 13.1 Motivation and objectives In Chapters 7 11, we considered the pricing decisions of a single firm in isolation, treating its demand curve as fixed. However, a firm
More informationOligopoly. Oligopoly is a market structure in which the number of sellers is small.
Oligopoly Oligopoly is a market structure in which the number of sellers is small. Oligopoly requires strategic thinking, unlike perfect competition, monopoly, and monopolistic competition. Under perfect
More informationa. Retail market for water and sewerage services Answer: Monopolistic competition, many firms each selling differentiated products.
Chapter 16 1. In which market structure would you place each of the following products: monopoly, oligopoly, monopolistic competition, or perfect competition? Why? a. Retail market for water and sewerage
More informationChapter 13 Market Structure and Competition
Chapter 13 Market Structure and Competition Solutions to Review Questions 1. Explain why, at a Cournot equilibrium with two firms, neither firm would have any regret about its output choice after it observes
More information13 MONOPOLISTIC COMPETITION AND OLIGOPOLY. Chapter. Key Concepts
Chapter 13 MONOPOLISTIC COMPETITION AND OLIGOPOLY Key Concepts Monopolistic Competition The market structure of most industries lies between the extremes of perfect competition and monopoly. Monopolistic
More informationExtreme cases. In between cases
CHAPTER 16 OLIGOPOLY FOUR TYPES OF MARKET STRUCTURE Extreme cases PERFECTLY COMPETITION Many firms No barriers to entry Identical products MONOPOLY One firm Huge barriers to entry Unique product In between
More informationEcon 101A Final exam Th 14 December. Do not turn the page until instructed to.
Econ 101A Final exam Th 14 December. Do not turn the page until instructed to. 1 Econ 101A Final Exam Th 14 December. Please solve Problem 1, 2, and 3 in the first blue book and Problem 4 in the second
More informationOligopoly. Unit 4: Imperfect Competition. Unit 4: Imperfect Competition 44. Oligopolies FOUR MARKET MODELS
1 Unit 4: Imperfect Competition FOUR MARKET MODELS Perfect Competition Monopolistic Competition Pure Characteristics of Oligopolies: A Few Large Producers (Less than 10) Identical or Differentiated Products
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes
More information(Perfect) Competition
(Perfect) Competition (Perfect) Competition The model of perfect competition is based on the following assumptions: (Perfect) Competition The model of perfect competition is based on the following assumptions:
More informationDo not open this exam until told to do so.
Do not open this exam until told to do so. Department of Economics College of Social and Applied Human Sciences K. Annen, Winter 004 Final (Version ): Intermediate Microeconomics (ECON30) Solutions Final
More informationUnit 5.4: Monopoly. Michael Malcolm. June 18, 2011
Unit 5.4: Monopoly Michael Malcolm June 18, 2011 1 Price Making A firm has a monopoly if it is the only seller of some good or service with no close substitutes. The key is that this firm has the power
More informationExam No. 3 Date: 7 or 9 May Instructor: Brian B. Young
Economics 212 Microeconomic Principles Exam No. 3 Date: 7 or 9 May 2012 Name The value of this exam is 100 points Instructor: Brian B. Young Please show your work where appropriate! Multiple Choice 2 points
More informationImperfect Competition. Oligopoly. Types of Imperfectly Competitive Markets. Imperfect Competition. Markets With Only a Few Sellers
Imperfect Competition Oligopoly Chapter 16 Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. Copyright 2001 by Harcourt, Inc. All rights reserved.
More informationEcon 111 (04) 2nd Midterm A
Econ 111 (04) 2nd Midterm A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following does not occur in perfect competition? A)
More informationMONOPOLISTIC COMPETITION AND OLIGOPOLY
MONOPOLISTIC COMPETITION AND OLIGOPOLY I. MONOPOLISTIC COMPETITION a. CHARACTERISTICS i. RELATIVELY LARGE NUMBER OF SELLERS 1. Each firm has a relatively small percentage of market share 2. No collusion
More informationOligopoly is a market structure more susceptible to gametheoretic analysis, because of apparent strategic interdependence among a few producers.
1 Market structure from a gametheoretic perspective: Oligopoly After our more theoretical analysis of different zerosum and variablesum games, let us return to the more familiar territory of economicsespecially
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Economics 103 Spring 2012: Multiple choice review questions for final exam. Exam will cover chapters on perfect competition, monopoly, monopolistic competition and oligopoly up to the Nash equilibrium
More informationTwo broad cases are noteworthy: Monopolistic Competition
Monopolistic Competition Until now, we have studied two extreme cases of competition: perfect competition and monopoly. Yet, reality is often in between: often, a firm s residual demand curve is downward
More informationPrice Competition Under Product Differentiation
Competition Under Product Differentiation Chapter 10: Competition 1 Introduction In a wide variety of markets firms compete in prices Internet access Restaurants Consultants Financial services Without
More informationR&D cooperation with unitelastic demand
R&D cooperation with unitelastic demand Georg Götz This draft: September 005. Abstract: This paper shows that R&D cooperation leads to the monopoly outcome in terms of price and quantity if demand is
More informationRutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003
Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003 Answers to Problem Set 11 Chapter 16 2. a. If there were many suppliers of diamonds, price would equal marginal
More informationChapter 16 Monopolistic Competition and Product Differentiation
Goldwasser AP Microeconomics Chapter 16 Monopolistic Competition and Product Differentiation BEFORE YOU READ THE CHAPTER Summary This chapter develops the model of monopolistic competition. It also discusses
More information