WHAT IS THE MICROECONOMICS? MICROECONOMICS TOPICS TYPES OF COMPETITION MARKET FOCUSING ON MONOPOLY ABOUT TURKEY GAME THEORY

1. MICROECONOMICS
MARKETING COMPETITION
PREPARED BY;
ELİF BEDİR

2. CONTENTS
 WHAT IS THE MICROECONOMICS?
 MICROECONOMICS TOPICS
 TYPES OF COMPETITION MARKET
 FOCUSING ON MONOPOLY ABOUT TURKEY
 GAME THEORY

3. WHAT IS THE MICROECONOMICS?
 Microeconomics is a branch of economics that studies the
behavior of individuals and firms in making decisions
regarding the allocation of limited resources.Typically, it
applies to markets where goods or services are bought and
sold. Microeconomics examines how these decisions and
behaviors affect the supply and demand for goods and
services, which determines prices, and how prices, in turn,
determine the quantity supplied and quantity demanded of
goods and services.
 http://www.investopedia.com/video/play/what-
microeconomics/

4.  Microeconomics studies a limited, smaller area of economics,
including the actions of individual consumers and businesses,
and the process by which both make their economic decisions
– buying, selling, the prices businesses charge for their goods
and services and how much of these goods and services they
produce and or offer. Microeconomic study reveals how start-
up businesses have determined the competitively successful
or unsuccessful pricing of their goods and services based on
consumer needs and choices, market competition and other
financial and economic formulas.Microeconomics also studies
supply-demand ratios and its effect on consumer spending
and business decision-making.

5. MICROECONOMICS TOPICS
 Demand, supply, and equilibrium; Supply and demand is
an economic model of price determination in a perfectly
competitive market. It concludes that in a perfectly competitive
market with no externalities, per unit taxes, or price controls, the unit
price for a particular good is the price at which the quantity
demanded by consumers equals the quantity supplied by producers.
This price results in a stable economic equilibrium.
 Measurement of elasticities; Elasticity is the measurement of
how responsive an economic variable is to a change in another
variable. Elasticity can be quantified as the ratio of the percentage
change in one variable to the percentage change in another variable,
when the later variable has a causal influence on the former. It is a
tool for measuring the responsiveness of a variable, or of the function
that determines it, to changes in causative variables in unitless ways.
Frequently used elasticities include price elasticity of demand, price
elasticity of supply,income elasticity of demand, elasticity of
substitution between factors of production and elasticity of
intertemporal substitution.

6.  Theory of production; Production theory is the study of
production, or the economic process of converting inputs into
outputs. Production uses resources to create a good or service that
is suitable for use, gift-giving in a gift economy, or exchange in
a market economy. This can include manufacturing, storing, shipping,
and packaging. Some economists define production broadly as all
economic activity other than consumption. They see every
commercial activity other than the final purchase as some form of
production.
Costs of production; The cost-of-production theory of value states
that the price of an object or condition is determined by the sum of the
cost of the resources that went into making it. The cost can comprise
any of the factors of production : labour, capital,land. Technology can be
viewed either as a form of fixed capital (ex:plant) or circulating
capital (ex:intermediate goods).

7.  Labour economics; Labour economics seeks to understand the
functioning and dynamics of the markets for wage labour. Labour
markets function through the interaction of workers and employers.
Labour economics looks at the suppliers of labour services (workers), the
demands of labour services (employers), and attempts to understand the
resulting pattern of wages, employment, and income.
 Welfare economics; Welfare economics is a branch of economics
that uses microeconomic techniques to evaluate well-being from
allocation of productive factors as to desirability and economic efficiency
within an economy, often relative to competitive general equilibrium.
 Economics of information; Information economics or
the economics of information is a branch of microeconomic
theory that studies how information and information systems
affect an economy and economic decisions. Information has
special characteristics. It is easy to create but hard to trust. It is
easy to spread but hard to control. It influences many decisions.
These special characteristics (as compared with other types of
goods) complicate many standard economic theories.


8. COMPETITION MARKET
There are several models of market structure, these include:
 Pure Competition
 Pure Monopoly
 Monopolistic Competition
 Oligopoly

9. PURE COMPETITION
Pure competition is a term that describes a market that has a broad
range of competitors who are selling the same products. It is often
referred to as perfect competition. Here are some characteristics that
define a pure competition.
 In an ideal purely competitive market, the products being sold would
be identical, which removes the option of one seller offering
something different or better than another seller.
 Because there are so many competitors in the market offering the
same product at the same price, one competitor doesn't have an
edge over the others. Essentially, all the sellers are equal.
 New companies can easily enter the market.
 The price of products is determined solely by what consumers are
willing to pay.
I can summarize the pure competition is atomized competition,
price taker, freedom of entry & exit, no nonprice competition,
standardized product. (Example; snickers, twix etc.)

10. OLIGOPOLY
An oligopoly is a market structure where a few, large firms control most of the
market. If you think about a monopoly, where a single entity controls the
entire market, or perfect competition, where there are many smaller
companies selling the same goods and services, we needed to find a happy
medium - something between having a store on every corner but not having
one brand that rules them all. So, oligopolies were formed.
Oligopoly Examples: crude oil (Kuwait, Iraq, Saudi Arabia, Venezuela,
Kazakhstan, Azerbeijan) , coke (Coca Cola, Pepsi, Cola Turka), GSM
providers (Turkcell, Vodafone, Avea), inter-city bus transportation (between
Istanbul & Denizli: Varan, Ulusoy, Pamukkale, Köseoğlu), airline travel
(between Istanbul and Frankfurt: Turkish Airlines, Pegasus, …) etc.
o http://www.investopedia.com/video/play/oligopoly/

11. MONOPOLISTIC COMPETITION
Competition is essential in order to have a market economy, also
called a 'free market,' or 'capitalism.'There are four conditions that
must be met for monopolistic competition to exist. These conditions
influence how producers and consumers interact and ultimately
determine the behaviors of industry participants. The four conditions
of a monopolistic competition that must exist:
 There are many consumers and producers in the market, but no
single producer has significantly more control than any other
producer.
 There are differences between the competitors' products, but not
price differences.
 The producers have some control over the price they charge.
 There are low barriers to enter and exit the market.
 Monopolistic Competition Examples: music CDs (every artist has
a different CD), movies (every film is different), computer games,
restaurants, athletic apparel (adidas, nike, umbro, Turkish brands),
etc.

12. PURE MONOPOLY
A pure monopoly is a market structure where one company is the single
source for a product and there are no close substitutes for the
product available. Pure monopolies are relatively rare. In order for a
provider to maintain a pure monopoly, there must be barriers
preventing competitors from entering the market. Let's look briefly at
some possible barriers:
 Legal barriers:The monopoly may exist indefinitely with the
government's permission and in other cases, a monopoly is granted
for a specific period of time. Some examples of legal barriers are
government-issued licenses, copyrights, and patents.
 Control of resources:This barrier exists when a sole provider owns or
controls an essential resource necessary to production.
 Economies of scale:The economies of scale barrier occurs when the
average total cost of a product goes down when production
increases.In terms of monopolies, an existing business with an
established infrastructure has a cost advantage when producing
large quantities of a given product, enabling it to undercut the
competition on price.

13. MONOPOLY OF TURKEY’S MARKET
 BOTAS; BOTAŞ Petroleum Pipeline Corporation (BOTAS) is the
state-owned crude oil and natural gas pipelines and trading company
inTurkey. The company was established in 1974 as a subsidiary
of Türkiye Petrolleri Anonim Ortaklığı (TPAO). Since 1995, BOTAS is
a wholly state-owned company.

14.  History of Botas; BOTAŞ was originally established in 1974 for
construction and operation of the Kirkuk-Ceyhan Oil Pipeline. Since
1987, BOTAŞ has been also involved in the natural gas
transportation and trade activities. From February 9, 1990 until May
2, 2001, BOTAŞ had monopoly rights on natural gas import,
distribution, sales and pricing.[1] In practice, the gas distribution
monopoly of BOTAŞ ended only in 2007, when Royal Dutch
Shell andBosphorus Gaz, a joint venture of Gazprom and Tur Enerji,
started to sell natural gas in the market.
 In addition to the Kirkuk-Ceyhan Oil Pipeline, BOTAŞ owns and
operates Ceyhan-Kırıkkale, Batman-Dörtyol, and Şelmo-Batman
crude oil pipelines. It also owns and operates the national gas grid of
Turkey with total length of 4,500 kilometres (2,800 mi), and Marmara
Ereğlisi Liquefied Natural Gas (LNG) Import Terminal. Internationally
BOTAŞ participates in the Baku-Tbilisi-Ceyhan pipeline, Arab Gas
Pipeline section between Syria and Turkey, and Turkey-Greece
pipeline.[1] It is also partner in the Nabucco Pipelineproject.

15. KIRKUK-CEYHAN PIPELINE

16. TEDAS
 To eliminate disorganized structure in electricity sector and in order
to ensure operation integrity, TEK was established with omitted
act no. 1312 in 1970, out of privileged companies task areas and
of municipal boundaries, throughout the countryelectrical power
production, transmission, distribution, and sales services are united
in the TEK organization. In order to maintain services more effective,
more efficient and in a modern manner way
and within framework privatization policies , TEK was
restructed with Council of Ministers decree dated
12.08.1993 and no. 93/4789, under the name of Turkey Electricity
Production-Transmission Company (TEAŞ) and Turkish Electricity
Distribution Company (TEDAŞ) as a two separate state economic
enterprise.
 In 1994 TEAŞ and TEDAŞ incorporated. Today in order for creating
a competitive environment in electrical distribution and the retail
sector and necessary reforms was made on the basis aiming for
distribution areas to restructuring electric establishment in public
ownership thereby priviziation of electrical energy distribution
services, with high board of privatization decree, dated 02.04.2004
and no. 2004/22, TEDAŞ was included in coverage and program of
privatisation.

17.  Distribution areas are divided into 21 distribution area by
afresh determination. TEDAŞ throughout the country from smallest village till
metropol, today more than 26 million its subscribers up to 36kV power
distribution and selling service obligation’s fullfilled from its establishment to
the present day more than 10 years by targeting maximum productivity and
profitability.

18. TURK TELEKOM
 Türk Telekom, Turkey’s leading communication and convergence
technologies company, successfully continues to sustain its mission
of providing Turkey with the latest communication technologies.

19. MINES OF TURKEY
 BORON;
 Turkey is the first case in the world of boron source. The main boron
beds in Turkey, Balikesir, Kutahya, Bursa and is located in Eskisehir,
and forty to operate their mines in Bor (Eskişehir), Emet (Kütahya),
Bigadic (Balıkesir), and Kestelek (Kutahya) has te facilities.

21.  Two dimensions: 1-Number of firms 2-Product
differentiation
 Perfect Competition: Many No
 Monopoly: One No
 Oligopoly: A few No
 Monopolistic Comp.: Many Yes

22. Game theory is a major method used in mathematical economics and
business for modeling competing behaviors of
interacting agents.[8] Applications include a wide array of economic
phenomena and approaches, such as auctions, bargaining, mergers &
acquisitions pricing,[9] fair division, duopolies, oligopolies, social
network formation, agent-based computational economics,[10] general
equilibrium, mechanism design,[11] and voting systems;[12] and across
such broad areas as experimental economics,[13] behavioral
economics,[14] information economics,[2] industrial
organization,[15] and political economy.[16][17]
This research usually focuses on particular sets of strategies known
as "solution concepts" or "equilibria". A common assumption is that
players act rationally. In non-cooperative games, the most famous of
these is the Nash equilibrium. A set of strategies is a Nash equilibrium if
each represents a best response to the other strategies. If all the players
are playing the strategies in a Nash equilibrium, they have no unilateral
incentive to deviate, since their strategy is the best they can do given
what others are doing.[18][19]
The payoffs of the game are generally taken to represent the utility of
individual players.

23. The payoffs of the game are generally taken to represent the utility of
individual players.
A prototypical paper on game theory in economics begins by presenting
a game that is an abstraction of a particular economic situation. One
or more solution concepts are chosen, and the author demonstrates
which strategy sets in the presented game are equilibria of the
appropriate type. Naturally one might wonder to what use this
information should be put. Economists and business professors
suggest two primary uses (noted
above): descriptive and prescriptive.
Some of play are Battle of the sexes, Peace war game, Pirate game,
Prisoner’s Dilemma, and Trust game etc..

24. PRISONER’S DILEMMA

25. The prisoners' dilemma is an example of how difficult it is to create the conditions
for cooperation even should the two firm oligopoly. Profit is always created by
the cooperation conditions for companies more profits, providing a "dominant
strategy" are available. Dominant strategy, defined as worrying about ways
that you can follow the best strategy for a player to be followed by other
players.
In this case, the difficulty of cooperation will gain in terms of cooperation
obtained from the actor, "it is due to the good earnings" being. Dominance of
self interest, if oligopolistic cooperation "low production - high price -
monopoly profit" makes it difficult to follow the path.

26. PRISONER’S DILEMMA EXPLANATION:
o Consider two robbers;
o Decided to Rob a bank and went to do it.

27.  The Plan went wrong and get caught.
 Both were kept in separate cell to avoid interaction.

28.  Each of them provided with same set of offers, that are:

29.  Dominance Strategy: the thing I preferred keeping other
person’s views in mind.
 Nash Equilibrium: if no player can do better by unilaterally
changing his strategy, then such a set of strategies is Nash
Equilibrium. (I don’t want to change my strategy given your
strategy)
 Pareto Efficient: both maximize utility to the most. Confess
Deny Confess 5 years 5 years 0 years 20 years Deny 20
years 0 years 1 year 1 year