The document discusses market structures and oligopoly behavior through a game theory lens. It begins by introducing the four main market models: pure competition, monopolistic competition, oligopoly, and pure monopoly. It then examines the characteristics of monopolistic competition and oligopoly in more detail. For oligopolies, it discusses concentration measures, mutual interdependence, and collusive tendencies. It provides an example game theory payoff matrix to illustrate how firms may interact in an oligopoly and gravitate towards less competitive outcomes without collusion. Overall, the document uses game theory to analyze the strategic interactions between firms in oligopolistic markets.
The document provides an agenda and overview of Total S.A., a leading integrated oil and gas company. The summary includes:
- Total is engaged in all aspects of the petroleum industry, including exploration, production, refining, chemicals, and marketing operations in over 130 countries.
- The document outlines Total's business model, which involves vertical integration across the value chain from upstream exploration to downstream delivery to customers.
- An analysis of Total's resources, competencies, and the attractiveness and competitiveness of different industry segments like oil/gas, renewables, and chemicals is also provided.
This document defines oligopoly as a market structure with a few firms selling standardized or differentiated products. It has the following key characteristics: few firms with large sizes, homogeneous or differentiated products, mutual interdependence where firms consider rivals' reactions, and barriers to entry that restrict new competition. Firms in an oligopoly engage in non-price competition through advertising and innovation. They also face a kinked demand curve that creates price rigidity and a range where costs can change without affecting profits. Game theory can model the strategic interactions between oligopolistic rivals.
Students should be able to:
Use simple game theory to illustrate the interdependence that exists in oligopolistic markets
Understanding the prisoners’ dilemma and a simple two firm/two outcome model. Students should analyse the advantages/disadvantages of being a first mover
Students will not be expected to have an understanding of the Nash Equilibrium
This document discusses different market structures including imperfect competition, monopoly, and perfect competition. It provides details on pure monopoly, including how a monopolist determines price and output by setting marginal revenue equal to marginal cost. The document also discusses barriers to entry for monopolies and natural monopolies where large-scale production allows for lower costs. Government regulation of natural monopolies is also mentioned.
The document discusses the marginal productivity theory of resource demand. It explains that under pure competition, the demand for a resource is determined by the marginal revenue product (MRP) of that resource. The MRP is equal to the change in total revenue from selling the additional output produced by one more unit of the resource. Under the rule of marginal decision making, resources will be employed up to the point where the marginal revenue product (MRP) equals the marginal resource cost (MRC). The document also provides an example of how MRP can be depicted as a demand schedule for a resource under pure competition.
Introduction to Competition Economics Lecture_2_2016_For PublicationLuke Wainscoat
The document provides an introduction to competition economics and game theory. It discusses how game theory can be used to analyze strategic interactions between firms. It presents examples of static and sequential games, including the prisoner's dilemma, coordination games, and the ultimatum game. Equilibrium concepts for games such as dominant strategies and Nash equilibria are introduced. Models of oligopoly including Bertrand price competition and Cournot quantity competition are examined. Applications of game theory to issues like entry deterrence and predatory pricing are also summarized.
This document discusses the concept of oligopoly, which refers to a market structure with a small number of firms producing similar or identical products. The key feature of oligopoly is the tension between cooperation and self-interest among firms. While cooperating to act as a monopolist would be most profitable, firms have an incentive to compete by increasing their own production. As a result, oligopolies typically produce more and charge lower prices than a monopoly, but less and higher than a competitive market. Game theory, such as the prisoner's dilemma, demonstrates why cooperation is difficult to maintain in oligopolies.
The document provides an agenda and overview of Total S.A., a leading integrated oil and gas company. The summary includes:
- Total is engaged in all aspects of the petroleum industry, including exploration, production, refining, chemicals, and marketing operations in over 130 countries.
- The document outlines Total's business model, which involves vertical integration across the value chain from upstream exploration to downstream delivery to customers.
- An analysis of Total's resources, competencies, and the attractiveness and competitiveness of different industry segments like oil/gas, renewables, and chemicals is also provided.
This document defines oligopoly as a market structure with a few firms selling standardized or differentiated products. It has the following key characteristics: few firms with large sizes, homogeneous or differentiated products, mutual interdependence where firms consider rivals' reactions, and barriers to entry that restrict new competition. Firms in an oligopoly engage in non-price competition through advertising and innovation. They also face a kinked demand curve that creates price rigidity and a range where costs can change without affecting profits. Game theory can model the strategic interactions between oligopolistic rivals.
Students should be able to:
Use simple game theory to illustrate the interdependence that exists in oligopolistic markets
Understanding the prisoners’ dilemma and a simple two firm/two outcome model. Students should analyse the advantages/disadvantages of being a first mover
Students will not be expected to have an understanding of the Nash Equilibrium
This document discusses different market structures including imperfect competition, monopoly, and perfect competition. It provides details on pure monopoly, including how a monopolist determines price and output by setting marginal revenue equal to marginal cost. The document also discusses barriers to entry for monopolies and natural monopolies where large-scale production allows for lower costs. Government regulation of natural monopolies is also mentioned.
The document discusses the marginal productivity theory of resource demand. It explains that under pure competition, the demand for a resource is determined by the marginal revenue product (MRP) of that resource. The MRP is equal to the change in total revenue from selling the additional output produced by one more unit of the resource. Under the rule of marginal decision making, resources will be employed up to the point where the marginal revenue product (MRP) equals the marginal resource cost (MRC). The document also provides an example of how MRP can be depicted as a demand schedule for a resource under pure competition.
Introduction to Competition Economics Lecture_2_2016_For PublicationLuke Wainscoat
The document provides an introduction to competition economics and game theory. It discusses how game theory can be used to analyze strategic interactions between firms. It presents examples of static and sequential games, including the prisoner's dilemma, coordination games, and the ultimatum game. Equilibrium concepts for games such as dominant strategies and Nash equilibria are introduced. Models of oligopoly including Bertrand price competition and Cournot quantity competition are examined. Applications of game theory to issues like entry deterrence and predatory pricing are also summarized.
This document discusses the concept of oligopoly, which refers to a market structure with a small number of firms producing similar or identical products. The key feature of oligopoly is the tension between cooperation and self-interest among firms. While cooperating to act as a monopolist would be most profitable, firms have an incentive to compete by increasing their own production. As a result, oligopolies typically produce more and charge lower prices than a monopoly, but less and higher than a competitive market. Game theory, such as the prisoner's dilemma, demonstrates why cooperation is difficult to maintain in oligopolies.
There is no single model that describes oligopoly behavior. Oligopolies are characterized by a small number of firms producing either standardized or differentiated products with high barriers to entry. The decisions of oligopolistic firms are interdependent since the actions of one firm affect others. Game theory uses strategic decision making to analyze how firms in an oligopoly might respond to each other. Models include the cartel model, where firms collude to act as a monopoly, and the contestable market model, where easy entry leads to competitive pricing.
Perfect competition requires: firms are price takers, many sellers/buyers, free entry/exit, identical products, complete information. In short-run, individual firms maximize profits where marginal cost (MC) equals marginal revenue (MR). Market supply is the sum of individual firm MC curves. In long-run, zero economic profits are achieved as new entry drives prices down until MC equals average costs.
An oligopoly is characterized by a market with a few dominant firms that have power over price. There are also many smaller firms and the product is either standardized or differentiated. The dominant firms fear retaliation from one another if they change prices, so they engage in nonprice competition instead of price wars. High concentration in an oligopoly results from economies of scale, business cycles eliminating weak competitors, mergers, and barriers to entry. Firms in an oligopoly are interdependent and must consider how their competitors will respond to their actions.
This document defines oligopoly and key aspects of oligopolistic markets. It notes that oligopoly is characterized by a high concentration ratio of the top firms controlling over 60% of the market, branded products, and significant barriers to entry that allow long-run supernormal profits. It emphasizes that in oligopoly, firms' decisions are interdependent and uncertain since each firm is aware of and influences its competitors. Non-price competition through factors like innovation, quality, and customer service is particularly important in oligopoly due to price stickiness near marginal cost.
This document outlines the curriculum for LL.B. Part-II, including the 7 subjects (papers), their contents, and recommended books. The subjects are: 1) The Constitution of Pakistan, 1973, 2) Administrative Law, 3) Company Law, 4) Law of Transfer of Property, 5) Muslim Personal Law, 6) Public International Law, and 7) Constitutional History of Pakistan. For each subject, the document provides details on the course contents and legal concepts covered, as well as a list of recommended books and references.
This document discusses oligopoly, which is a market structure dominated by a few large firms. It begins by defining oligopoly and noting its key characteristics, including few sellers, barriers to entry, and mutual dependence between firms.
It then outlines six types of oligopoly: pure, differentiated, collusive, non-collusive, open, and closed. Examples are provided to illustrate each type. Common barriers to entry in oligopolistic markets are also defined.
Several real-world examples of oligopolistic industries are explained, such as the smart phone, computer, music, auto, and soft drink industries. Models of oligopoly behavior are briefly introduced, focusing on the kinked demand model and price leadership models
Monopoly is a market structure where there is only one seller of a product or service. Examples include public utilities like electricity and water.
Under monopoly, the firm faces a downward sloping demand curve and sets a price where marginal revenue equals marginal cost to maximize profits. This price is generally higher and quantity lower than under perfect competition.
Price discrimination is when a monopolist charges different prices to different customers, even though the cost of production is the same. It allows a firm to extract more consumer surplus. Conditions for effective price discrimination include the ability to segment markets and prevent resale.
This document summarizes a lecture about collusion and cartels in oligopoly markets. It introduces dynamic game theory concepts like subgame perfect equilibrium and discusses their application to models of collusion. Specifically, it analyzes whether cooperation can occur in infinitely and finitely repeated Cournot oligopoly games. It finds that if firms are sufficiently patient, with high enough discount rates, then strategies involving periodic cooperation and punishment for deviation can constitute a subgame perfect equilibrium, supporting collusive outcomes.
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
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# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
Our Vision & Mission – Simplifying Students Life
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1. Oligopoly is a market structure with few sellers offering similar or differentiated products where the sellers recognize their interdependence.
2. Under oligopoly, firms may engage in independent pricing, collusive pricing through explicit or implicit coordination, or price leadership where one dominant firm sets the price.
3. Sweezy's kinked demand curve model suggests that under oligopoly, prices tend to be rigid because firms will match price cuts but not price increases to avoid losing customers. However, the model makes unrealistic assumptions and fails to consider non-price competition.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key characteristics of each including:
1) Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms compete through non-price factors like advertising and product quality.
2) Oligopoly is dominated by a few large firms producing either homogeneous or differentiated products. Entry is difficult due to barriers like economies of scale. Firms must consider competitors' potential reactions in their pricing decisions.
3) Game theory, such as the prisoner's dilemma, can model strategic interactions between oligopolistic competitors who are mutually interdependent. Firms must choose strategies without communicating directly with rivals.
This document discusses oligopoly markets, which are imperfectly competitive markets with few sellers offering similar products. Key characteristics of oligopolies include interdependent firms that are best off cooperating to produce less output and charge above marginal costs, but there is tension between cooperation and self-interest. A duopoly is presented as an example of an oligopoly with two members. The document analyzes outcomes of duopolists cooperating like a monopoly or competing, and how the number of sellers in an oligopoly affects market prices and quantities.
This document provides an overview of monopoly as a market structure. It defines monopoly and barriers to entry. It then examines monopoly in the short-run and long-run, including profit maximization where marginal revenue equals marginal cost. The document discusses the advantages of monopoly in terms of lower costs from economies of scale but also the disadvantages, including inefficient allocation of resources and deadweight loss compared to perfect competition. It concludes by introducing the concept of price discriminating monopolies.
This document defines oligopoly as a market structure with few sellers offering either homogeneous or differentiated products. It provides examples of industries like cement, steel, and petroleum that sell homogeneous goods, as well as industries like automobiles, TVs, and computers that sell differentiated products. The document outlines characteristics of oligopolies like few firms, price-setting ability, product similarities, and strategic interactions between competitors. It also lists factors that give rise to oligopolies, such as large capital requirements, economies of scale, patents, control of raw materials, and mergers and acquisitions.
This document provides an overview of collusive oligopoly and price leadership models. It defines collusive oligopoly as when oligopolistic firms make joint pricing and output decisions through agreement. Price leadership is described as an informal practice where one firm sets prices that other firms closely follow. Two types of price leadership are discussed: by a low-cost firm, and by a dominant firm that has large market share. The document also explains barometric price leadership, where the most experienced firm assesses market conditions and sets prices others willingly follow.
A monopoly is characterized by a single firm controlling the entire market for a good or service with no close substitutes. This allows the firm to set prices without competition. While monopolies can benefit from economies of scale, they also restrict output to raise prices and profits, resulting in an inefficient allocation of resources and loss of consumer welfare. Modern examples include electricity distribution networks and Google's dominance as a search engine.
1) A monopoly is a market structure with a single seller of a product without close substitutes.
2) The key characteristics of a monopoly are that it is the sole price maker and faces a downward sloping demand curve, unlike competitive firms which are price takers.
3) Barriers to entry, such as government licenses, large economies of scale, or ownership of key resources allow monopolies to exist by preventing competition from entering the market.
This chapter discusses international transactions and exchange rates. It introduces the balance of payments, which records international financial transactions in the current account and capital/financial account. The current account tracks the balance on goods/services and net investment income. Exchange rates are determined by demand and supply in the currency market under flexible rates. A balance of payments deficit means demand for foreign currency exceeds supply, depreciating the domestic currency. The US has run large and persistent trade deficits due to high growth, China, oil prices, and low domestic savings.
This document provides an overview of international trade concepts including:
- Comparative advantage allows nations to specialize and gain from trade by producing goods where they have a lower opportunity cost.
- Tariffs and quotas create inefficiencies by raising domestic prices and reducing trade quantities from free trade levels.
- Arguments for protectionism include infant industries needing support and unfair foreign competition, but protection reduces overall economic welfare.
This document outlines different macroeconomic theories including:
- Classical theory which assumes stable aggregate demand and a vertical aggregate supply curve.
- The Keynesian view which sees unstable aggregate demand and prices/wages as downwardly inflexible requiring active policy.
- Real business cycle theory which sees recessions as caused by coordination failures and stable price levels.
- New classical economics which believes in rational expectations and the economy's ability to self-correct through price level changes.
- Debate around monetary rules versus discretionary policy approaches.
This document discusses government budget deficits and surpluses. It defines key terms like budget deficit, surplus, and public debt. It examines factors that cause deficits like wars and recessions. It analyzes trends in US deficits and surpluses from 1990 to 2010. It also discusses ownership of the public debt and options for using budget surpluses, such as paying down debt or increasing spending. Substantive issues covered include crowding out effects on investment and issues around foreign ownership of public debt.
This document discusses economic growth and productivity. It covers topics like production possibilities analysis, supply and demand factors of growth, accounting for U.S. growth over time, and the impact of new technologies. Specific drivers of growth mentioned include increases in the labor force, capital goods, education levels, productivity, and technology advancements. Charts show historical U.S. growth rates and contributions to output growth from factors like technological progress and human capital development.
There is no single model that describes oligopoly behavior. Oligopolies are characterized by a small number of firms producing either standardized or differentiated products with high barriers to entry. The decisions of oligopolistic firms are interdependent since the actions of one firm affect others. Game theory uses strategic decision making to analyze how firms in an oligopoly might respond to each other. Models include the cartel model, where firms collude to act as a monopoly, and the contestable market model, where easy entry leads to competitive pricing.
Perfect competition requires: firms are price takers, many sellers/buyers, free entry/exit, identical products, complete information. In short-run, individual firms maximize profits where marginal cost (MC) equals marginal revenue (MR). Market supply is the sum of individual firm MC curves. In long-run, zero economic profits are achieved as new entry drives prices down until MC equals average costs.
An oligopoly is characterized by a market with a few dominant firms that have power over price. There are also many smaller firms and the product is either standardized or differentiated. The dominant firms fear retaliation from one another if they change prices, so they engage in nonprice competition instead of price wars. High concentration in an oligopoly results from economies of scale, business cycles eliminating weak competitors, mergers, and barriers to entry. Firms in an oligopoly are interdependent and must consider how their competitors will respond to their actions.
This document defines oligopoly and key aspects of oligopolistic markets. It notes that oligopoly is characterized by a high concentration ratio of the top firms controlling over 60% of the market, branded products, and significant barriers to entry that allow long-run supernormal profits. It emphasizes that in oligopoly, firms' decisions are interdependent and uncertain since each firm is aware of and influences its competitors. Non-price competition through factors like innovation, quality, and customer service is particularly important in oligopoly due to price stickiness near marginal cost.
This document outlines the curriculum for LL.B. Part-II, including the 7 subjects (papers), their contents, and recommended books. The subjects are: 1) The Constitution of Pakistan, 1973, 2) Administrative Law, 3) Company Law, 4) Law of Transfer of Property, 5) Muslim Personal Law, 6) Public International Law, and 7) Constitutional History of Pakistan. For each subject, the document provides details on the course contents and legal concepts covered, as well as a list of recommended books and references.
This document discusses oligopoly, which is a market structure dominated by a few large firms. It begins by defining oligopoly and noting its key characteristics, including few sellers, barriers to entry, and mutual dependence between firms.
It then outlines six types of oligopoly: pure, differentiated, collusive, non-collusive, open, and closed. Examples are provided to illustrate each type. Common barriers to entry in oligopolistic markets are also defined.
Several real-world examples of oligopolistic industries are explained, such as the smart phone, computer, music, auto, and soft drink industries. Models of oligopoly behavior are briefly introduced, focusing on the kinked demand model and price leadership models
Monopoly is a market structure where there is only one seller of a product or service. Examples include public utilities like electricity and water.
Under monopoly, the firm faces a downward sloping demand curve and sets a price where marginal revenue equals marginal cost to maximize profits. This price is generally higher and quantity lower than under perfect competition.
Price discrimination is when a monopolist charges different prices to different customers, even though the cost of production is the same. It allows a firm to extract more consumer surplus. Conditions for effective price discrimination include the ability to segment markets and prevent resale.
This document summarizes a lecture about collusion and cartels in oligopoly markets. It introduces dynamic game theory concepts like subgame perfect equilibrium and discusses their application to models of collusion. Specifically, it analyzes whether cooperation can occur in infinitely and finitely repeated Cournot oligopoly games. It finds that if firms are sufficiently patient, with high enough discount rates, then strategies involving periodic cooperation and punishment for deviation can constitute a subgame perfect equilibrium, supporting collusive outcomes.
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
We connect Students who have an understanding of course material with Students who need help.
Benefits:-
# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
Our Vision & Mission – Simplifying Students Life
Our Belief – “The great breakthrough in your life comes when you realize it, that you can learn anything you need to learn; to accomplish any goal that you have set for yourself. This means there are no limits on what you can be, have or do.”
Like Us - https://www.facebook.com/FellowBuddycom
1. Oligopoly is a market structure with few sellers offering similar or differentiated products where the sellers recognize their interdependence.
2. Under oligopoly, firms may engage in independent pricing, collusive pricing through explicit or implicit coordination, or price leadership where one dominant firm sets the price.
3. Sweezy's kinked demand curve model suggests that under oligopoly, prices tend to be rigid because firms will match price cuts but not price increases to avoid losing customers. However, the model makes unrealistic assumptions and fails to consider non-price competition.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key characteristics of each including:
1) Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms compete through non-price factors like advertising and product quality.
2) Oligopoly is dominated by a few large firms producing either homogeneous or differentiated products. Entry is difficult due to barriers like economies of scale. Firms must consider competitors' potential reactions in their pricing decisions.
3) Game theory, such as the prisoner's dilemma, can model strategic interactions between oligopolistic competitors who are mutually interdependent. Firms must choose strategies without communicating directly with rivals.
This document discusses oligopoly markets, which are imperfectly competitive markets with few sellers offering similar products. Key characteristics of oligopolies include interdependent firms that are best off cooperating to produce less output and charge above marginal costs, but there is tension between cooperation and self-interest. A duopoly is presented as an example of an oligopoly with two members. The document analyzes outcomes of duopolists cooperating like a monopoly or competing, and how the number of sellers in an oligopoly affects market prices and quantities.
This document provides an overview of monopoly as a market structure. It defines monopoly and barriers to entry. It then examines monopoly in the short-run and long-run, including profit maximization where marginal revenue equals marginal cost. The document discusses the advantages of monopoly in terms of lower costs from economies of scale but also the disadvantages, including inefficient allocation of resources and deadweight loss compared to perfect competition. It concludes by introducing the concept of price discriminating monopolies.
This document defines oligopoly as a market structure with few sellers offering either homogeneous or differentiated products. It provides examples of industries like cement, steel, and petroleum that sell homogeneous goods, as well as industries like automobiles, TVs, and computers that sell differentiated products. The document outlines characteristics of oligopolies like few firms, price-setting ability, product similarities, and strategic interactions between competitors. It also lists factors that give rise to oligopolies, such as large capital requirements, economies of scale, patents, control of raw materials, and mergers and acquisitions.
This document provides an overview of collusive oligopoly and price leadership models. It defines collusive oligopoly as when oligopolistic firms make joint pricing and output decisions through agreement. Price leadership is described as an informal practice where one firm sets prices that other firms closely follow. Two types of price leadership are discussed: by a low-cost firm, and by a dominant firm that has large market share. The document also explains barometric price leadership, where the most experienced firm assesses market conditions and sets prices others willingly follow.
A monopoly is characterized by a single firm controlling the entire market for a good or service with no close substitutes. This allows the firm to set prices without competition. While monopolies can benefit from economies of scale, they also restrict output to raise prices and profits, resulting in an inefficient allocation of resources and loss of consumer welfare. Modern examples include electricity distribution networks and Google's dominance as a search engine.
1) A monopoly is a market structure with a single seller of a product without close substitutes.
2) The key characteristics of a monopoly are that it is the sole price maker and faces a downward sloping demand curve, unlike competitive firms which are price takers.
3) Barriers to entry, such as government licenses, large economies of scale, or ownership of key resources allow monopolies to exist by preventing competition from entering the market.
This chapter discusses international transactions and exchange rates. It introduces the balance of payments, which records international financial transactions in the current account and capital/financial account. The current account tracks the balance on goods/services and net investment income. Exchange rates are determined by demand and supply in the currency market under flexible rates. A balance of payments deficit means demand for foreign currency exceeds supply, depreciating the domestic currency. The US has run large and persistent trade deficits due to high growth, China, oil prices, and low domestic savings.
This document provides an overview of international trade concepts including:
- Comparative advantage allows nations to specialize and gain from trade by producing goods where they have a lower opportunity cost.
- Tariffs and quotas create inefficiencies by raising domestic prices and reducing trade quantities from free trade levels.
- Arguments for protectionism include infant industries needing support and unfair foreign competition, but protection reduces overall economic welfare.
This document outlines different macroeconomic theories including:
- Classical theory which assumes stable aggregate demand and a vertical aggregate supply curve.
- The Keynesian view which sees unstable aggregate demand and prices/wages as downwardly inflexible requiring active policy.
- Real business cycle theory which sees recessions as caused by coordination failures and stable price levels.
- New classical economics which believes in rational expectations and the economy's ability to self-correct through price level changes.
- Debate around monetary rules versus discretionary policy approaches.
This document discusses government budget deficits and surpluses. It defines key terms like budget deficit, surplus, and public debt. It examines factors that cause deficits like wars and recessions. It analyzes trends in US deficits and surpluses from 1990 to 2010. It also discusses ownership of the public debt and options for using budget surpluses, such as paying down debt or increasing spending. Substantive issues covered include crowding out effects on investment and issues around foreign ownership of public debt.
This document discusses economic growth and productivity. It covers topics like production possibilities analysis, supply and demand factors of growth, accounting for U.S. growth over time, and the impact of new technologies. Specific drivers of growth mentioned include increases in the labor force, capital goods, education levels, productivity, and technology advancements. Charts show historical U.S. growth rates and contributions to output growth from factors like technological progress and human capital development.
15 interest rates and monetary policy newagjohnson
This chapter discusses monetary policy and how central banks like the Federal Reserve influence interest rates and the money supply. It covers the demand for and supply of money, how the Fed uses tools like open market operations and adjusting interest rates to affect the federal funds rate. It then explains how changes in monetary policy can influence aggregate demand, GDP, and inflation in the economy. The chapter also discusses some advantages and challenges of monetary policy.
This document discusses how banks create money through fractional reserve banking and lending. It explains that banks keep only a portion of deposits as reserves, allowing them to lend out the excess and thereby create new money through the money multiplier effect. As more banks participate in lending, the initial deposit is multiplied across the banking system, with each new deposit creating still more loans and money. A monetary multiplier formula is provided to calculate the maximum increase in money from a given increase in reserves. The system is subject to risks of bank panics if depositors lose confidence and demand withdrawals.
The document discusses the demand and supply of money. It defines different measures of the money supply (M1, M2, M3) which include currency, checkable deposits, savings deposits, money market funds and other savings instruments. The amount of money in circulation depends on how much is demanded by individuals and businesses for transactions and storing wealth. The supply of money is determined by monetary authorities like the Federal Reserve and expands/contracts to meet business needs. Money derives its value from its functions as a medium of exchange, store of value and unit of account which depend on it maintaining stability and purchasing power over time.
This chapter discusses money and banking. It defines the components of the money supply as M1 (currency and checkable deposits) and M2 (M1 plus near monies like savings deposits and money market funds). M1 makes up about 44% of the money supply while M2 makes up the other 56%. The Federal Reserve System acts as the central bank and implements monetary policy through tools like open market operations and setting reserve requirements. Its goals are to facilitate trade, maintain financial system stability, and manage inflation.
This document discusses fiscal policy and its effects on the economy. It covers topics like discretionary versus non-discretionary fiscal policy, how expansionary and contractionary fiscal policies impact aggregate demand and price levels, financing budget deficits and surpluses, built-in stability from automatic stabilizers, full employment deficits, evaluating fiscal policy, problems and criticisms of fiscal policy, and the interactions between fiscal policy and aggregate supply and inflation. Diagrams are presented illustrating these fiscal policy concepts.
This chapter discusses business cycles, unemployment, and inflation. It covers the phases of the business cycle including peaks, recessions, troughs, and expansions. It also discusses the measurement and types of unemployment, including frictional, structural, and cyclical unemployment. The chapter covers inflation measurement using the Consumer Price Index and types of inflation including demand-pull and cost-push inflation. It discusses the impacts of both unemployment and inflation.
This document provides an overview of key concepts in aggregate demand and aggregate supply analysis including:
- The aggregate demand curve is downward sloping due to the real-balances, interest-rate, and foreign purchases effects. The aggregate supply curve has three segments: horizontal, upward-sloping intermediate, and vertical.
- Equilibrium output and price levels occur at the intersection of the aggregate demand and supply curves. A shift in either curve results in a new equilibrium.
- Determinants that influence aggregate demand and supply are discussed, such as consumer spending, investment, government spending, net exports, input prices, and productivity.
- Examples are given of how changes in aggregate demand or supply can cause inflation
This document presents slides on macroeconomic concepts related to consumption, saving, investment, and equilibrium GDP in a closed economy. It introduces key terms like the consumption schedule, saving schedule, average and marginal propensities to consume, investment demand curve, and equilibrium GDP. The slides define these concepts, show them graphically, and discuss how shifts can occur. It also covers non-income determinants of consumption and saving, shifts in investment demand, the instability of investment, and how equilibrium GDP is achieved through the equality of planned savings and investment.
Unemployment has three categories - frictional from job searching, structural from skill/job mismatches, and institutional from policies like minimum wage - which together are considered the natural rate of 5-6%. The measured unemployment rate minus the natural rate is defined as cyclical unemployment.
This document discusses national income accounting and measuring economic output through Gross Domestic Product (GDP). It provides background on how GDP was developed by Simon Kuznets in the 1930s as a way to measure the overall health and performance of the economy. The document defines GDP as the total market value of all final goods and services produced within a country in a given year. It also outlines the different approaches to calculating GDP, including the expenditure approach which adds consumption, investment, government spending, and net exports.
Equilibrium and disequilibrium in markets are discussed. Equilibrium occurs when quantity demanded equals quantity supplied at the equilibrium price. Disequilibrium can occur due to shortages or surpluses caused by price floors or ceilings. Price floors create surpluses while price ceilings create shortages. The government can cause disequilibrium through policies like rent control and minimum wage laws. Non-price rationing may also occur when social pressures prevent prices from reaching equilibrium.
The document is a series of slides about demand and supply in markets. It defines key concepts like demand, supply, equilibrium and how they are represented graphically. It discusses how demand and supply curves are determined by various factors. It also shows how demand and supply curves can shift due to changes in these determining factors, and how such shifts affect equilibrium price and quantity.
This document discusses supply, including the law of supply, supply schedules, supply curves, market supply, and the differences between changes in supply versus changes in quantity supplied. The law of supply states that price and quantity supplied move directly. A supply schedule shows the quantity supplied at different prices, and a supply curve graphs this relationship. Market supply is the total supply from all firms. A change in supply is a shift of the supply curve due to factors like input prices, technology, the number of sellers, or taxes. A change in quantity supplied moves along the existing supply curve due to price changes.
This document provides an overview of demand, including the circular flow diagram, demand schedules, the law of demand, demand curves, market demand, changes in demand versus changes in quantity demanded, and factors that cause changes in demand such as number of buyers, tastes and preferences, income, prices of other goods, availability of credit, and expectations about future prices. It explains that a change in demand is a shift of the entire demand curve, while a change in quantity demanded is a movement along the existing demand curve caused by a change in price.
The circular flow diagram shows the interdependence between households and businesses in an economy. Money flows from businesses to households in exchange for labor, land, capital, and entrepreneurship in factor markets. Households then use this money to buy goods and services from businesses in product markets, completing the circular flow. This simple model illustrates how factor and product markets coordinate economic decisions between households as consumers and producers and businesses as consumers of factors and producers of goods.
1. Superio
25
Monopolistic Competition r
Characteristics
Cheese
CHAPTER
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency
Key Terms
Monopolistic
Previous Next
Competition
and Oligopoly
Slide Slide
End
Show
25 - 1
Copyright McGraw-Hill/Irwin, 2002
2. FOUR MARKET MODELS
Monopolistic Competition:
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
• Relatively Large
Monopolistic Competition and Efficiency
Oligopoly
Number of Sellers
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price Leadership • Differentiated Products
• Easy Entry and Exit
Oligopoly and Efficiency
Key Terms
Pure Monopolistic Pure
Competition Competition Oligopoly Monopoly
Previous Next
Slide Slide
End Market Structure Continuum
Show
25 - 2
Copyright McGraw-Hill/Irwin, 2002
3. CHARACTERISTICS
Monopolistic Competition
Characteristics
Relatively Large Number
Price and Output in Monopolistic Competition
of Sellers
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory •Small Market Shares
•No Collusion
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency
Key Terms
•Independent Action
Previous Next
Slide Slide
End
Show
25 - 3
Copyright McGraw-Hill/Irwin, 2002
4. CHARACTERISTICS
Monopolistic Competition
Characteristics
Differentiated Products
Price and Output in Monopolistic Competition
• Product Attributes
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
• Service
Cartels and Collusion
Price Leadership • Location
• Brand Names and
Oligopoly and Efficiency
Key Terms
Packaging
• Some Control Over Price
Previous Next
Slide
End
Slide
Role of Advertising
Show
25 - 4
Copyright McGraw-Hill/Irwin, 2002
5. PRICE AND OUTPUT IN
Monopolistic Competition MONOPOLISTIC COMPETITION
Expect New Competitors MC
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
ATC
Oligopolies and Mergers
Three Oligopoly Models
Price and Costs
Kinked-Demand Theory
Cartels and Collusion P1
Price Leadership
Oligopoly and Efficiency A1
Key Terms
Economic
Profits D
Previous
Slide
Next
Slide
MR
End
Show Q1
25 - 5 Quantity
Copyright McGraw-Hill/Irwin, 2002
6. PRICE AND OUTPUT IN
Monopolistic Competition MONOPOLISTIC COMPETITION
Expect New Competitors MC
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
ATC
Oligopolies and Mergers
Three Oligopoly Models
New competition drives down the
Price and Costs
Kinked-Demand Theory
Cartels and Collusion
Price Leadership
price level – leading to economic
P
1
Oligopoly and Efficiency
Key Terms
A
1 losses in the short run
Economic
Profits D
Previous
Slide
Next
Slide
MR
End
Show Q1
25 - 6 Quantity
Copyright McGraw-Hill/Irwin, 2002
7. PRICE AND OUTPUT IN
Monopolistic Competition MONOPOLISTIC COMPETITION
Characteristics MC
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
ATC
Oligopolies and Mergers
Three Oligopoly Models A2
Price and Costs
Kinked-Demand Theory
P2
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency
Key Terms
Economic
Losses
D
Previous
Slide
Next
Slide
MR
End
Show Q2
25 - 7 Quantity
Copyright McGraw-Hill/Irwin, 2002
8. PRICE AND OUTPUT IN
Monopolistic Competition MONOPOLISTIC COMPETITION
Characteristics MC
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
ATC
Oligopolies and Mergers
A
With economic losses, firms will
Three Oligopoly Models
2
Price and Costs
Kinked-Demand Theory
P 2
exit the market – Stability occurs
Cartels and Collusion
Price Leadership
when economic profits are zero
Economic
Oligopoly and Efficiency
Key Terms
Losses
D
Previous
Slide
Next
Slide
MR
End
Show Q2
25 - 8 Quantity
Copyright McGraw-Hill/Irwin, 2002
9. PRICE AND OUTPUT IN
Monopolistic Competition MONOPOLISTIC COMPETITION
Long-Run Equilibrium MC
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency Normal
Oligopoly
Oligopolies and Mergers Profit ATC
Three Oligopoly Models
Only
Price and Costs
Kinked-Demand Theory
P3
Cartels and Collusion
Price Leadership
= A3
Oligopoly and Efficiency
Key Terms
D
Previous
Slide
Next
Slide
MR
End
Show Q3
25 - 9 Quantity
Copyright McGraw-Hill/Irwin, 2002
10. MONOPOLISTIC COMPETITION
Monopolistic Competition
Characteristics
AND EFFICIENCY
• Not Productively Efficient
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
≠ Minimum ATC
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency • Not Allocatively Efficient
Key Terms
Price ≠ MC
Previous
Slide
Next
Slide
• Excess Capacity
End
Show
25 - 10
Graphically…
Copyright McGraw-Hill/Irwin, 2002
11. MONOPOLISTIC COMPETITION
Monopolistic Competition
AND EFFICIENCY
Characteristics
Long-Run Equilibrium MC
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency Price is Not
Oligopoly
Oligopolies and Mergers
= Minimum ATC
Three Oligopoly Models ATC
Price and Costs
Kinked-Demand Theory
P3
Cartels and Collusion
Price Leadership
= A3
Oligopoly and Efficiency
Key Terms
Price ≠ MC
D
Previous
Slide
Next
Slide
MR
End
Show Q3
25 - 11 Quantity
Copyright McGraw-Hill/Irwin, 2002
12. MONOPOLISTIC COMPETITION
Monopolistic Competition
Characteristics
AND EFFICIENCY
Product Variety
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory • Benefits of Product Variety
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency • Nonprice Competition
Key Terms
• Advertising Role
• Trial & Error Search for
Previous Next
Maximum Profits
Slide Slide
End
Show
25 - 12
Copyright McGraw-Hill/Irwin, 2002
13. FOUR MARKET MODELS
Oligopoly:
Monopolistic Competition
Characteristics
• A Few Large Producers
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
• Homogeneous or
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Differentiated Products
Price Leadership
Oligopoly and Efficiency
• Control Over Price, But
Key Terms
Mutual Interdependence
• Entry Barriers
Pure Monopolistic Pure
Previous Next Competition Competition Oligopoly Monopoly
Slide Slide
End
Show
25 - 13
Market Structure Continuum
Copyright McGraw-Hill/Irwin, 2002
14. OLIGOPOLIES AND MERGERS
Mergers
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Measures of Industry
Monopolistic Competition and Efficiency
Oligopoly
Concentration
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price Leadership
• Concentration Ratio
Oligopoly and Efficiency
Key Terms • Localized Markets
• Interindustry Competition
Previous Next
• World Trade
Slide
End
Slide
•Import Competition
Show
25 - 14
Copyright McGraw-Hill/Irwin, 2002
15. OLIGOPOLIES AND MERGERS
Herfindahl Index
Monopolistic Competition
Characteristics
Sum of the squared percentage
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
market
Three Oligopoly Models shares for all firms in the industry –
Kinked-Demand Theory
Cartels and Collusion Places greater weight upon the larger
Price Leadership
Oligopoly and Efficiency
firms
(%s1)2 + (%s2)2 + (%s3)2 + … + (%sn)2
Key Terms
A greater Herfindahl Index
indicates a greater concentration
Previous Next of market power in the industry
Slide Slide
End (Pure competition is near zero)
Show
25 - 15
Copyright McGraw-Hill/Irwin, 2002
16. OLIGOPOLIES AND MERGERS
Monopolistic Competition
Characteristics
Mutual Interdependence
Price and Output in Monopolistic Competition
Game-Theory Model
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory Collusive Tendencies
•Collusion
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency
Incentive to Cheat
Key Terms
Introduction to Game
Previous
Slide
End
Next
Slide Theory…
Show
25 - 16
Copyright McGraw-Hill/Irwin, 2002
17. OLIGOPOLY BEHAVIOR
A Game-Theory Overview
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
RareAir’s Price Strategy
Oligopoly
High Low
Oligopolies and Mergers
A B
Three Oligopoly Models
$12 $15
Uptown’s Price Strategy
Kinked-Demand Theory
Cartels and Collusion
Price Leadership High
Oligopoly and Efficiency
Key Terms
$12 $6
C $6 D $8
Previous Next Low
Slide Slide
$15 $8
End
Show
25 - 17
Copyright McGraw-Hill/Irwin, 2002
18. OLIGOPOLY BEHAVIOR
A Game-Theory Overview
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
RareAir’s Price Strategy
Oligopoly
High Low
Oligopolies and Mergers
A B
Three Oligopoly Models
$12 $15 Greatest
Uptown’s Price Strategy
Kinked-Demand Theory
Cartels and Collusion Combined
Price Leadership High Profit
Oligopoly and Efficiency
Key Terms
$12 $6
C $6 D $8
Previous Next Low
Slide Slide
$15 $8
End
Show
25 - 18
Copyright McGraw-Hill/Irwin, 2002
19. OLIGOPOLY BEHAVIOR
A Game-Theory Overview
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
RareAir’s Price Strategy
Oligopoly
High Low
Oligopolies and Mergers
A B
Three Oligopoly Models
$12 $15
Uptown’s Price Strategy
Kinked-Demand Theory Independent
Cartels and Collusion Actions
Price Leadership High Stimulate
Oligopoly and Efficiency
Key Terms
$12 $6 Response
C $6 D $8
Previous Next Low
Slide Slide
$15 $8
End
Show
25 - 19
Copyright McGraw-Hill/Irwin, 2002
20. OLIGOPOLY BEHAVIOR
A Game-Theory Overview
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
RareAir’s Price Strategy
Oligopoly
High Low
Oligopolies and Mergers
A B
Three Oligopoly Models
$12 $15
Uptown’s Price Strategy
Kinked-Demand Theory Independent
Cartels and Collusion Actions
Price Leadership High Stimulate
Oligopoly and Efficiency
Key Terms
$12 $6 Response
Gravitating
C $6 D $8 to the
Low Worst Case
Previous Next
Slide Slide
$15 $8
End
Show
25 - 20
Copyright McGraw-Hill/Irwin, 2002
21. OLIGOPOLY BEHAVIOR
A Game-Theory Overview
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
RareAir’s Price Strategy
Oligopoly
High Low
Oligopolies and Mergers
Collusion
A B
Three Oligopoly Models
$12 $15
Uptown’s Price Strategy
Kinked-Demand Theory
Cartels and Collusion
Invites a
Price Leadership High Different
Oligopoly and Efficiency
$12 $6 Solution
Key Terms
C $6 D $8
Previous Next Low
Slide Slide
$15 $8
End
Show
25 - 21
Copyright McGraw-Hill/Irwin, 2002
22. OLIGOPOLY BEHAVIOR
A Game-Theory Overview
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
RareAir’s Price Strategy
Oligopoly
High Low
Oligopolies and Mergers
Collusion
A B
Three Oligopoly Models
$12 $15
Uptown’s Price Strategy
Kinked-Demand Theory
Cartels and Collusion
Invites a
Price Leadership High Different
Oligopoly and Efficiency
$12 $6 Solution
Key Terms
C $6 D $8
Previous Next Low
Slide Slide
$15 $8
End
Show
25 - 22
Copyright McGraw-Hill/Irwin, 2002
23. OLIGOPOLY BEHAVIOR
A Game-Theory Overview
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
RareAir’s Price Strategy
Oligopoly
High Low
Oligopolies and Mergers
Collusion
A B
Three Oligopoly Models
$12 $15
Uptown’s Price Strategy
Kinked-Demand Theory
Cartels and Collusion
Invites a
Price Leadership High Different
Oligopoly and Efficiency
$12 $6 Solution
Key Terms
But, the
incentive
C $6 D $8 to cheat
Previous Next Low is very
Slide Slide
$15 $8 real
End
Show
25 - 23
Copyright McGraw-Hill/Irwin, 2002
24. THREE OLIGOPOLY MODELS
Monopolistic Competition
Characteristics No Standard Model due to...
Diversity of Oligopolies
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Complications of
Interdependence
Kinked-Demand Theory
Cartels and Collusion
Price Leadership
Alternative Models:
Oligopoly and Efficiency
Key Terms
1 - Kinked Demand Curve
Previous Next
2 - Collusive Pricing
3 - Price Leadership
Slide Slide
End
Show
25 - 24
Copyright McGraw-Hill/Irwin, 2002
25. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
The firm’s demand and
Oligopoly marginal revenue curves
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
Previous Next
Slide Slide D1
End
Show
25 - 25
Quantity MR1
Copyright McGraw-Hill/Irwin, 2002
26. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
The rival’s demand and
Oligopoly marginal revenue curves
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
D2
Previous Next MR2
Slide Slide D1
End
Show
25 - 26
Quantity MR1
Copyright McGraw-Hill/Irwin, 2002
27. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition Rivals tend to
Monopolistic Competition and Efficiency
Oligopoly
follow a price cut
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
D2
Previous Next MR2
Slide Slide D1
End
Show
25 - 27
Quantity MR1
Copyright McGraw-Hill/Irwin, 2002
28. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition Rivals tend to
Monopolistic Competition and Efficiency
Oligopoly
follow a price cut
Oligopolies and Mergers
Three Oligopoly Models
or ignore a
Kinked-Demand Theory price increase
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
D2
Previous Next MR2
Slide Slide D1
End
Show
25 - 28
Quantity MR1
Copyright McGraw-Hill/Irwin, 2002
29. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Effectively creating
Oligopoly a kinked demand curve
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
D2
Previous Next MR2
Slide Slide D1
End
Show
25 - 29
Quantity MR1
Copyright McGraw-Hill/Irwin, 2002
30. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Effectively creating
Oligopoly a kinked demand curve
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
Previous Next
Slide Slide D
End
Show
25 - 30
Quantity
Copyright McGraw-Hill/Irwin, 2002
31. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Effectively creating
Oligopoly a kinked demand curve
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory MC1
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
MC2
Previous Next
Slide Slide D
End
Show
25 - 31
Quantity MR
Copyright McGraw-Hill/Irwin, 2002
32. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Profit maximization
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
MR = MC occurs
Oligopolies and Mergers
Three Oligopoly Models
at the kink
Kinked-Demand Theory MC1
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
MC2
Previous Next
Slide Slide D
End
Show
25 - 32
Quantity MR
Copyright McGraw-Hill/Irwin, 2002
33. KINKED DEMAND THEORY:
Monopolistic Competition NONCOLLUSIVE OLIGOPOLY
Characteristics
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
This behavior can set
Oligopoly
Oligopolies and Mergers
off a price war
Three Oligopoly Models
Kinked-Demand Theory MC1
Cartels and Collusion
Price
Price Leadership
Oligopoly and Efficiency
Key Terms
MC2
Previous Next
Slide Slide D
End
Show
25 - 33
Quantity MR
Copyright McGraw-Hill/Irwin, 2002
34. CARTELS AND OTHER COLLUSION
Oligopoly is conducive to
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
collusion
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
If a few firms face identical
or highly similar demand
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency
Key Terms
and costs...
They will tend to seek joint
Previous
Slide
Next
Slide profit maximization...
End
Show
25 - 34
Graphically…
Copyright McGraw-Hill/Irwin, 2002
35. CARTELS AND OTHER COLLUSION
Monopolistic Competition
Characteristics
Colluding Oligopolists Will
Price and Output in Monopolistic Competition Split the Monopoly Profits
Economic
Monopolistic Competition and Efficiency
Oligopoly
Profit
Oligopolies and Mergers Price and costs
Three Oligopoly Models
Kinked-Demand Theory
MC
Cartels and Collusion
Price Leadership P0
Oligopoly and Efficiency
Key Terms A0 ATC
D
Previous Next MR = MC
Slide Slide MR
End
Show Q0
25 - 35
Copyright McGraw-Hill/Irwin, 2002
36. CARTELS AND OTHER COLLUSION
Monopolistic Competition
Characteristics
Overt Collusion
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
•Cartel
•OPEC
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Covert Collusion
Price Leadership
Oligopoly and Efficiency
Key Terms
•Recent Examples
Previous Next
•Tacit Understandings
Slide Slide
End
Show
25 - 36
Copyright McGraw-Hill/Irwin, 2002
37. CARTELS AND OTHER COLLUSION
Monopolistic Competition
Characteristics Obstacles to Collusion
Price and Output in Monopolistic Competition
• Demand and Cost
Monopolistic Competition and Efficiency
Oligopoly
Differences
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price Leadership • Number of Firms
• Cheating
Oligopoly and Efficiency
Key Terms
• Recession
Previous
Slide
Next
Slide
• Potential Entry
End
Show
25 - 37
• Antitrust Law
Copyright McGraw-Hill/Irwin, 2002
38. PRICE LEADERSHIP MODEL
Monopolistic Competition
Characteristics
Leadership Tactics
Price and Output in Monopolistic Competition
•Infrequent Price
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Changes
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price Leadership
Oligopoly and Efficiency
Key Terms
•Communications
•Limit Pricing
Previous Next
Breakdowns in Price
Slide
End
Show
Slide
Leadership
25 - 38
Copyright McGraw-Hill/Irwin, 2002
39. OLIGOPOLY AND ADVERTISING
Less Easily Duplicated
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
Adequate Resources
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Positive Effects of
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Advertising
Price Leadership
Oligopoly and Efficiency
Key Terms
Potential Negative
Previous
Slide
Next
Slide
Effects of Advertising
End
Show
25 - 39
Brand Development
Copyright McGraw-Hill/Irwin, 2002
40. OLIGOPOLY AND EFFICIENCY
Productive Efficiency
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
P = Minimum ATC
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory Oligopoly: No Productive Efficiency
Cartels and Collusion
Allocative Efficiency
Price Leadership
Oligopoly and Efficiency
Key Terms
P = MC
Oligopoly: No Allocative Efficiency
Previous Next
Qualifications
Slide Slide
End
Show
25 - 40
Copyright McGraw-Hill/Irwin, 2002
41. OLIGOPOLY AND EFFICIENCY
Productive Efficiency
Monopolistic Competition
Characteristics
Price and Output in Monopolistic Competition
P = Minimum ATC
Monopolistic Competition and Efficiency
Oligopoly
Chapter
Oligopolies and Mergers
Three Oligopoly Models
Kinked-Demand Theory Oligopoly: No Productive Efficiency
Cartels and Collusion
Conclusions
Allocative Efficiency
Price Leadership
Oligopoly and Efficiency
Key Terms
P = MC
Oligopoly: No Allocative Efficiency
Previous Next
Qualifications
Slide Slide
End
Show
25 - 41
Copyright McGraw-Hill/Irwin, 2002
42. monopolistic competition interindustry competition
product differentiation import competition
Herfindahl index
nonprice competition
game-theory model
excess capacity
collusion
oligopoly kinked-demand curve
homogeneous oligopoly price war
differentiated oligopoly cartel
mutual interdependence tacit understandings
concentration ratio price leadership
Copyright McGraw-Hill/Irwin 2002 BACK END
43. Monopolistic Competition
Characteristics
Next...
Technology,
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Oligopolies and Mergers
R&D,
Three Oligopoly Models
Kinked-Demand Theory
Cartels and Collusion
Price Leadership
and
Oligopoly and Efficiency
Key Terms
Previous
Slide
Next
Slide
Efficiency
End
Show Chapter 26
25 - 43
Copyright McGraw-Hill/Irwin, 2002