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1. Consider the 3 market structures we have
learned so far
2. What do they seem to depend on?
Bade/
Parkin
Ch18
Perfect
Competition
Monopolistic
Competition
Oligopoly Monopoly
Oligopoly
 Features:
 Few large firms
 Very similar products
 Interdependent
 Firms compete on products, not price
 Very difficult to start new firm
 Very difficult to close down firm
 Not fully informed consumers
Measuring Market Concentration
 Concentration ratio: the percentage of the
market’s total output supplied by its four largest
firms.
 The higher the concentration ratio,
the less competition.
Concentration Ratios in Selected U.S.
Industries Industry Concentration ratio
Video game consoles 100%
Tennis balls 100%
Credit cards 99%
Batteries 94%
Soft drinks 93%
Web search engines 92%
Breakfast cereal 92%
Cigarettes 89%
Greeting cards 88%
Beer 85%
Cell phone service 82%
Autos 79%
OLIGOPOLY6
The Size of the Oligopoly
 As the number of firms in the market increases,
 the price effect becomes smaller
 the oligopoly looks more and more like a competitive
market
 P approaches MC
 the market quantity approaches the socially efficient
quantity
Another benefit of international trade:
Trade increases the number of firms competing,
increases Q, brings P closer to marginal cost
Automakers as example
Special type of Oligopoly
 Duopoly
 Oligopoly with only 2 firms
 Comic books
 Coke vs. Pepsi
What type of market?
What type of market?
What type of market?
What type of market?
What type of market?
 Movie theaters inTucson
What type of market?
 BroadcastTV
What type of market?
What type of market?
What type of market?

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03 ch17 oligopoly

  • 1. 1. Consider the 3 market structures we have learned so far 2. What do they seem to depend on? Bade/ Parkin Ch18
  • 3. Oligopoly  Features:  Few large firms  Very similar products  Interdependent  Firms compete on products, not price  Very difficult to start new firm  Very difficult to close down firm  Not fully informed consumers
  • 4. Measuring Market Concentration  Concentration ratio: the percentage of the market’s total output supplied by its four largest firms.  The higher the concentration ratio, the less competition.
  • 5. Concentration Ratios in Selected U.S. Industries Industry Concentration ratio Video game consoles 100% Tennis balls 100% Credit cards 99% Batteries 94% Soft drinks 93% Web search engines 92% Breakfast cereal 92% Cigarettes 89% Greeting cards 88% Beer 85% Cell phone service 82% Autos 79%
  • 6. OLIGOPOLY6 The Size of the Oligopoly  As the number of firms in the market increases,  the price effect becomes smaller  the oligopoly looks more and more like a competitive market  P approaches MC  the market quantity approaches the socially efficient quantity Another benefit of international trade: Trade increases the number of firms competing, increases Q, brings P closer to marginal cost Automakers as example
  • 7. Special type of Oligopoly  Duopoly  Oligopoly with only 2 firms  Comic books  Coke vs. Pepsi
  • 8. What type of market?
  • 9. What type of market?
  • 10. What type of market?
  • 11. What type of market?
  • 12.
  • 13. What type of market?  Movie theaters inTucson
  • 14. What type of market?  BroadcastTV
  • 15. What type of market?
  • 16. What type of market?
  • 17. What type of market?

Editor's Notes

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