Olig
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Oligopoly is a market structure with a small number of firms that produce either homogeneous or differentiated products. These firms must consider how their actions will affect competitors due to interdependence. There are substantial barriers to entry in oligopolistic markets. Firms may collude to act like a monopoly and earn profits, or they may compete and drive prices down to zero profits. However, collusion is difficult to maintain because firms have an incentive to secretly cut prices. Oligopolistic markets can involve price leadership or operate according to Sweezy's kinked demand curve model, which explains price rigidity. Concentration ratios and the Herfindahl index measure the degree of concentration in an industry. Mergers are evaluated based on
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Olig
Oligopoly is a market structure with a small number of firms producing either homogeneous or differentiated products. Firms in an oligopoly are interdependent, so the actions of one firm affect others. Firms may collude to act like a monopoly and earn profits, or they may compete and drive prices down to zero profits. Collusion is more difficult to sustain when price cuts are hard to detect, market conditions are unstable, and antitrust enforcement is vigorous. Some oligopolies involve price leadership, where one firm sets the industry price that others follow.
Chapter 23 pure competition
This document discusses the characteristics of pure competition in markets. It defines pure competition as having many small firms, standardized products, free entry and exit into the market, and firms that are price takers. The document outlines the objectives of analyzing pure competition as examining demand from the seller's perspective, how firms respond to price in the short-run, long-run industry adjustments, and efficiency. It also provides examples of profit maximization and loss minimization for competitive firms.
AP MIcro Monopolistic Competition and Oligolopy
This document summarizes key concepts about monopolistic competition and oligopoly market structures. It discusses how monopolistic competition involves a relatively large number of sellers offering differentiated products, with easy entry and exit into the market. Firms have some control over price in the short run but experience zero economic profits in the long run. The document also describes how oligopolies have a small number of large producers offering either homogeneous or differentiated products, with strategic interdependence between firms. Oligopolies can involve collusion, price leadership, or noncooperative behavior modeled using game theory.
Pure Competition
The document discusses market structure and perfect competition. It defines market structure as considering the number of firms, nature of products, degree of monopoly power, and other factors. Economists group markets into four structures: pure competition, monopolistic competition, oligopoly, and pure monopoly. The document then focuses on defining pure competition, including that it involves many small firms, standardized products, firms being price takers, and free entry and exit. It also discusses the demand, costs, revenues, and equilibrium outcomes for competitive firms.
Perfect Competition in the Long Run
This document discusses perfect competition in the long run. It provides two scenarios to analyze how a perfectly competitive firm, Joe the catfish farmer, would respond to a decline in prices. If prices fell to $71/unit, Joe should shut down his business as it would be cheaper than producing at a loss. However, if prices only fell to $81/unit, Joe should continue operating in the short run to minimize his losses until prices potentially increase. The document also discusses how, in perfect competition, the constant entry and exit of firms in response to profits and losses drives prices toward the lowest point on the average total cost curve in the long run.
Oligopoly
This document discusses various concepts related to oligopoly market structure including:
1) Oligopoly is characterized by few sellers that make interdependent decisions regarding price and output. Barriers to entry allow for potential economic profits in the long run.
2) Models of oligopoly include Cournot, Sweezy, and collusive models like cartels with price leadership.
3) Game theory can be used to analyze strategic interactions between oligopolists through concepts like the prisoner's dilemma, Nash equilibrium, and concentration measures.
Imperfect competition issues
This document discusses market structures between the extremes of perfect competition and monopoly. It describes imperfect competition, where firms have some control over prices and face downward sloping demand curves. The main types of imperfect competition are monopolistic competition, with many differentiated firms, and oligopoly, with a small number of interdependent firms. The document analyzes oligopolistic interactions through concepts like reaction functions, the kinked demand curve model, and Nash-Cournot equilibrium. It also discusses collusion, contestable markets, and strategic entry deterrence.
Perfect competition in long run
The document discusses the concept of perfect competition in three main points:
1. Perfect competition describes a market structure where competition is at its highest level, with many small firms, homogeneous products, free entry and exit, and perfect information.
2. Under perfect competition, firms aim to maximize profits by producing at the quantity where marginal revenue equals marginal cost.
3. In the long run, if profits are above normal, more firms will enter the market, increasing supply and driving prices and profits back down to normal.
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Olig
Oligopoly is a market structure with a small number of firms producing either homogeneous or differentiated products. Firms in an oligopoly are interdependent, so the actions of one firm affect others. Firms may collude to act like a monopoly and earn profits, or they may compete and drive prices down to zero profits. Collusion is more difficult to sustain when price cuts are hard to detect, market conditions are unstable, and antitrust enforcement is vigorous. Some oligopolies involve price leadership, where one firm sets the industry price that others follow.
Chapter 23 pure competition
This document discusses the characteristics of pure competition in markets. It defines pure competition as having many small firms, standardized products, free entry and exit into the market, and firms that are price takers. The document outlines the objectives of analyzing pure competition as examining demand from the seller's perspective, how firms respond to price in the short-run, long-run industry adjustments, and efficiency. It also provides examples of profit maximization and loss minimization for competitive firms.
AP MIcro Monopolistic Competition and Oligolopy
This document summarizes key concepts about monopolistic competition and oligopoly market structures. It discusses how monopolistic competition involves a relatively large number of sellers offering differentiated products, with easy entry and exit into the market. Firms have some control over price in the short run but experience zero economic profits in the long run. The document also describes how oligopolies have a small number of large producers offering either homogeneous or differentiated products, with strategic interdependence between firms. Oligopolies can involve collusion, price leadership, or noncooperative behavior modeled using game theory.
Pure Competition
The document discusses market structure and perfect competition. It defines market structure as considering the number of firms, nature of products, degree of monopoly power, and other factors. Economists group markets into four structures: pure competition, monopolistic competition, oligopoly, and pure monopoly. The document then focuses on defining pure competition, including that it involves many small firms, standardized products, firms being price takers, and free entry and exit. It also discusses the demand, costs, revenues, and equilibrium outcomes for competitive firms.
Perfect Competition in the Long Run
This document discusses perfect competition in the long run. It provides two scenarios to analyze how a perfectly competitive firm, Joe the catfish farmer, would respond to a decline in prices. If prices fell to $71/unit, Joe should shut down his business as it would be cheaper than producing at a loss. However, if prices only fell to $81/unit, Joe should continue operating in the short run to minimize his losses until prices potentially increase. The document also discusses how, in perfect competition, the constant entry and exit of firms in response to profits and losses drives prices toward the lowest point on the average total cost curve in the long run.
Oligopoly
This document discusses various concepts related to oligopoly market structure including:
1) Oligopoly is characterized by few sellers that make interdependent decisions regarding price and output. Barriers to entry allow for potential economic profits in the long run.
2) Models of oligopoly include Cournot, Sweezy, and collusive models like cartels with price leadership.
3) Game theory can be used to analyze strategic interactions between oligopolists through concepts like the prisoner's dilemma, Nash equilibrium, and concentration measures.
Imperfect competition issues
This document discusses market structures between the extremes of perfect competition and monopoly. It describes imperfect competition, where firms have some control over prices and face downward sloping demand curves. The main types of imperfect competition are monopolistic competition, with many differentiated firms, and oligopoly, with a small number of interdependent firms. The document analyzes oligopolistic interactions through concepts like reaction functions, the kinked demand curve model, and Nash-Cournot equilibrium. It also discusses collusion, contestable markets, and strategic entry deterrence.
Perfect competition in long run
The document discusses the concept of perfect competition in three main points:
1. Perfect competition describes a market structure where competition is at its highest level, with many small firms, homogeneous products, free entry and exit, and perfect information.
2. Under perfect competition, firms aim to maximize profits by producing at the quantity where marginal revenue equals marginal cost.
3. In the long run, if profits are above normal, more firms will enter the market, increasing supply and driving prices and profits back down to normal.
Chap008
- Pure competition is characterized by many small firms, standardized products, firms being price takers, easy entry and exit in the industry, and each firm operating at minimum efficient scale.
- Individual firms are profit maximizers and will produce at the quantity where marginal revenue equals marginal cost to maximize profits or minimize losses.
- The market will reach equilibrium when the quantity supplied by all firms equals the quantity demanded at the market-clearing price, where the market supply curve is the horizontal sum of all individual firms' marginal cost curves.
Unit 2 3 4 And 2 3 5 Mc And Oligopoly
This document summarizes key characteristics of monopolistic competition. In 3 sentences: Firms in monopolistic competition have differentiated but substitutable products, they set price between the monopoly and competitive levels where marginal revenue equals marginal cost to earn normal profits in the long run, and while this leads to higher prices than perfect competition it provides benefits to consumers like variety and innovation.
Oligopoly Essentials
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.
Monopolistic Equilibrium in short and long run
In the short run, a monopolistically competitive firm will produce at the quantity where marginal cost equals marginal revenue to maximize profits. This occurs at a price above average cost, resulting in abnormal profits. In the long run, entry of new firms shifts individual demand curves down and costs curves up, eliminating abnormal profits so firms only earn normal profits where price equals average cost, establishing equilibrium.
Agri 2312 chapter 9 market equilibrium and product price imperfect competition
This chapter discusses different types of market structures beyond perfect competition, including imperfect competition in both selling and buying. It provides examples of monopolistic competition, oligopolies, and monopolies as imperfect competitors in selling, characterized by their ability to influence prices through product differentiation or barriers to entry. On the buying side, the chapter examines monopsonistic competition, oligopsonies, and monopsonies as imperfect competitors who are not price takers. The chapter concludes by outlining various governmental regulatory measures implemented to counteract the adverse effects of imperfect competition in markets.
AP Micro Pure Monopoly
1. The document discusses market structures and pure monopoly. A pure monopoly is characterized by a single seller, no close substitutes, price making ability, and blocked entry from competitors.
2. Barriers to entry for competitors of a pure monopoly include economies of scale, legal protections like patents, and control of essential resources. A natural monopoly exists when average total costs decline continuously with increasing output.
3. Under pure monopoly, the profit-maximizing firm will produce at the quantity where marginal revenue equals marginal cost and charge a price determined by the demand curve. This results in a higher price and lower quantity than under perfect competition.
Marketstructuresperfectcompetition 101207232006-phpapp01
The document discusses different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides characteristics of each, including the number of buyers and sellers, product differentiation, barriers to entry/exit, profit maximization where marginal revenue equals marginal cost, and equilibrium price and output. Monopolistic competition is defined as having many firms that can differentiate products somewhat and face relatively easy entry/exit into the industry. Examples of monopolistic competition include restaurants, plumbers, and hairdressers.
Cartel model economic
A cartel is a group of producers that work together to limit competition and fix prices. Cartels are formed when large producers collude to set industry prices where marginal revenue for each firm equals marginal cost. This allows the firms to act as a monopoly and set prices without competing on price. The cartel model assumes firms have constant and equal marginal costs. It shows the cartel output and pricing that maximizes total industry profits by having each firm produce a certain quantity.
Imperfect Competition
In a perfectly competitive market, firms are price-takers. It is largely regarded as an ideal situation and such a market situation is hard to find. In the real world, you are dealing with firms large enough to affect the market price. In many such markets there are handful of firms who dominate in one way or other. Such markets are market of imperfect competition.
Market Structure- Micro Economics
The selling environment in which a firm produces and sells its product is called a market structure.*
Defined by three characteristics:
The number of firms in the market
The ease of entry and exit of firms
The degree of product differentiation
Oligopoly Collusion and Game Theory
This document discusses oligopolies and game theory. It explains that when there are few dominant firms in a market, they can engage in practices like price fixing to restrict output and fix higher prices. This allows them to recognize their interdependence and act together to maximize joint profits. However, cartel agreements are often unstable as firms have an incentive to cheat and exceed their output quotas for higher individual profits. This prisoners' dilemma framework illustrates why cooperation is difficult even when it benefits all parties. Game theory models are useful for understanding interdependent pricing and other strategic decisions in oligopolistic markets.
Firms in competitive market
Firms in competitive markets are price takers and maximize profits by producing where marginal revenue equals marginal cost. In the short run, a competitive firm's supply curve is its marginal cost curve. In the long run, firms will enter or exit the market to earn normal profits when price equals average total cost. If demand increases in the short run, price and quantity rise as firms earn profits. In the long run, entry of new firms causes supply to increase, price and profits to fall back to normal.
Oligopoly Concept & Price Leadership Concept
This document defines and describes oligopoly. It begins by defining oligopoly as a market situation where a small number of firms control the market. It then provides examples of oligopolies, such as the retail gas market. The document outlines key characteristics of oligopolies, including interdependence, and describes different price leadership models that can occur in oligopolies, such as barometric, low-cost, and dominant firm price leadership. It concludes by stating that in an oligopoly, the main firm sets the price that is then followed by other competing firms.
The Model Of Perfect Competition
Perfect competition is an ideal market structure where many small firms produce identical goods, there are no barriers to entry or exit, and both buyers and sellers have perfect information. Under perfect competition in the long run, firms earn zero economic profit and both allocative and productive efficiency are achieved as price equals marginal cost and firms produce at minimum average total cost.
Maximum & Minimum prices
Maximum & Minimum prices content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics
Maximum Prices
Minimum Prices
Pros & Cons of Maximum & Minimum Prices
Limitations of Maximum & Minimum Prices
Alternatives to Maximum & Minimum Prices
Agri 2312 chapter 8 market equilibrium and product price
The document discusses market equilibrium under perfect competition. It defines key concepts like market supply, demand, producer surplus, consumer surplus, total economic surplus. It explains how the market supply curve is built by summing individual firm supply curves. It also discusses how markets adjust towards equilibrium through the cobweb theory and how demand and supply shifts as well as changes in input costs can impact the market equilibrium price and quantity from the perspective of individual firms.
4 perfect competition
Perfect competition is characterized by large numbers of buyers and sellers, homogeneous products, free entry and exit of firms, and firms being price takers with a horizontal demand curve. For profit maximization, firms in perfect competition are in equilibrium when marginal revenue equals marginal cost - if marginal revenue is greater than marginal cost, profits will rise by increasing output, and if marginal revenue is less than marginal cost, profits will fall by expanding output. In the short run, firms may earn abnormal profits by entering the market or incur losses by leaving the industry, but in the long run profits are driven to zero through free entry and exit.
Monoply
Here are the key points about costly price discrimination:
- If price discrimination involves costs, it may no longer be profitable for the firm to engage in it. The costs of discrimination must be less than the additional profits it generates.
- As discrimination costs rise, the firm will find it optimal to discriminate less, charging a smaller number of different prices or targeting fewer customer groups. In the limit of very high costs, it may charge a single undifferentiated price.
- This means the firm's output and total welfare may be lower when price discrimination is costly compared to if it could costlessly perfectly price discriminate. Output could fall short of the efficient competitive level.
- Consumers who are charged higher prices as
Oligopoly lesson 6a
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.
Oligopoly
Oligopoly is a market structure with a small number of firms producing similar or identical products. Barriers to entry, both natural and legal, limit competition and allow firms to be interdependent. With few competitors, oligopolistic firms are aware of and influence each other through pricing decisions. They may cooperate through explicit or implicit collusion like cartels to increase profits, though cartels are illegal. Models like the kinked demand curve and dominant firm theory explain oligopolistic behavior and pricing.
Monopolistic And Oligopoly
- Monopolistic competition describes a market with many producers offering similar but differentiated products, with each firm having some control over price. Barriers to entry are low, allowing firms to freely enter and exit the market.
- In the short run, firms maximize profits where marginal revenue equals marginal cost. In the long run with free entry and exit, firms earn zero economic profit as supply and demand equilibrate.
- Oligopoly is dominated by a few large firms. These firms are interdependent and must consider competitors' responses in decision making. Barriers to entry allow oligopolies to persist and earn economic profits.
12 2 oligopoly
Oligopolies are markets with a small number of interdependent firms. There is no single model of oligopoly behavior. 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. Game theory uses strategic decision making to analyze how firms in an oligopoly consider rivals' responses. The prisoner's dilemma demonstrates how cooperation can be difficult to achieve. Implicit collusion through price leadership or sticky prices also influences oligopoly behavior.
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Chap008
- Pure competition is characterized by many small firms, standardized products, firms being price takers, easy entry and exit in the industry, and each firm operating at minimum efficient scale.
- Individual firms are profit maximizers and will produce at the quantity where marginal revenue equals marginal cost to maximize profits or minimize losses.
- The market will reach equilibrium when the quantity supplied by all firms equals the quantity demanded at the market-clearing price, where the market supply curve is the horizontal sum of all individual firms' marginal cost curves.
Unit 2 3 4 And 2 3 5 Mc And Oligopoly
This document summarizes key characteristics of monopolistic competition. In 3 sentences: Firms in monopolistic competition have differentiated but substitutable products, they set price between the monopoly and competitive levels where marginal revenue equals marginal cost to earn normal profits in the long run, and while this leads to higher prices than perfect competition it provides benefits to consumers like variety and innovation.
Oligopoly Essentials
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.
Monopolistic Equilibrium in short and long run
In the short run, a monopolistically competitive firm will produce at the quantity where marginal cost equals marginal revenue to maximize profits. This occurs at a price above average cost, resulting in abnormal profits. In the long run, entry of new firms shifts individual demand curves down and costs curves up, eliminating abnormal profits so firms only earn normal profits where price equals average cost, establishing equilibrium.
Agri 2312 chapter 9 market equilibrium and product price imperfect competition
This chapter discusses different types of market structures beyond perfect competition, including imperfect competition in both selling and buying. It provides examples of monopolistic competition, oligopolies, and monopolies as imperfect competitors in selling, characterized by their ability to influence prices through product differentiation or barriers to entry. On the buying side, the chapter examines monopsonistic competition, oligopsonies, and monopsonies as imperfect competitors who are not price takers. The chapter concludes by outlining various governmental regulatory measures implemented to counteract the adverse effects of imperfect competition in markets.
AP Micro Pure Monopoly
1. The document discusses market structures and pure monopoly. A pure monopoly is characterized by a single seller, no close substitutes, price making ability, and blocked entry from competitors.
2. Barriers to entry for competitors of a pure monopoly include economies of scale, legal protections like patents, and control of essential resources. A natural monopoly exists when average total costs decline continuously with increasing output.
3. Under pure monopoly, the profit-maximizing firm will produce at the quantity where marginal revenue equals marginal cost and charge a price determined by the demand curve. This results in a higher price and lower quantity than under perfect competition.
Marketstructuresperfectcompetition 101207232006-phpapp01
The document discusses different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides characteristics of each, including the number of buyers and sellers, product differentiation, barriers to entry/exit, profit maximization where marginal revenue equals marginal cost, and equilibrium price and output. Monopolistic competition is defined as having many firms that can differentiate products somewhat and face relatively easy entry/exit into the industry. Examples of monopolistic competition include restaurants, plumbers, and hairdressers.
Cartel model economic
A cartel is a group of producers that work together to limit competition and fix prices. Cartels are formed when large producers collude to set industry prices where marginal revenue for each firm equals marginal cost. This allows the firms to act as a monopoly and set prices without competing on price. The cartel model assumes firms have constant and equal marginal costs. It shows the cartel output and pricing that maximizes total industry profits by having each firm produce a certain quantity.
Imperfect Competition
In a perfectly competitive market, firms are price-takers. It is largely regarded as an ideal situation and such a market situation is hard to find. In the real world, you are dealing with firms large enough to affect the market price. In many such markets there are handful of firms who dominate in one way or other. Such markets are market of imperfect competition.
Market Structure- Micro Economics
The selling environment in which a firm produces and sells its product is called a market structure.*
Defined by three characteristics:
The number of firms in the market
The ease of entry and exit of firms
The degree of product differentiation
Oligopoly Collusion and Game Theory
This document discusses oligopolies and game theory. It explains that when there are few dominant firms in a market, they can engage in practices like price fixing to restrict output and fix higher prices. This allows them to recognize their interdependence and act together to maximize joint profits. However, cartel agreements are often unstable as firms have an incentive to cheat and exceed their output quotas for higher individual profits. This prisoners' dilemma framework illustrates why cooperation is difficult even when it benefits all parties. Game theory models are useful for understanding interdependent pricing and other strategic decisions in oligopolistic markets.
Firms in competitive market
Firms in competitive markets are price takers and maximize profits by producing where marginal revenue equals marginal cost. In the short run, a competitive firm's supply curve is its marginal cost curve. In the long run, firms will enter or exit the market to earn normal profits when price equals average total cost. If demand increases in the short run, price and quantity rise as firms earn profits. In the long run, entry of new firms causes supply to increase, price and profits to fall back to normal.
Oligopoly Concept & Price Leadership Concept
This document defines and describes oligopoly. It begins by defining oligopoly as a market situation where a small number of firms control the market. It then provides examples of oligopolies, such as the retail gas market. The document outlines key characteristics of oligopolies, including interdependence, and describes different price leadership models that can occur in oligopolies, such as barometric, low-cost, and dominant firm price leadership. It concludes by stating that in an oligopoly, the main firm sets the price that is then followed by other competing firms.
The Model Of Perfect Competition
Perfect competition is an ideal market structure where many small firms produce identical goods, there are no barriers to entry or exit, and both buyers and sellers have perfect information. Under perfect competition in the long run, firms earn zero economic profit and both allocative and productive efficiency are achieved as price equals marginal cost and firms produce at minimum average total cost.
Maximum & Minimum prices
Maximum & Minimum prices content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics
Maximum Prices
Minimum Prices
Pros & Cons of Maximum & Minimum Prices
Limitations of Maximum & Minimum Prices
Alternatives to Maximum & Minimum Prices
Agri 2312 chapter 8 market equilibrium and product price
The document discusses market equilibrium under perfect competition. It defines key concepts like market supply, demand, producer surplus, consumer surplus, total economic surplus. It explains how the market supply curve is built by summing individual firm supply curves. It also discusses how markets adjust towards equilibrium through the cobweb theory and how demand and supply shifts as well as changes in input costs can impact the market equilibrium price and quantity from the perspective of individual firms.
4 perfect competition
Perfect competition is characterized by large numbers of buyers and sellers, homogeneous products, free entry and exit of firms, and firms being price takers with a horizontal demand curve. For profit maximization, firms in perfect competition are in equilibrium when marginal revenue equals marginal cost - if marginal revenue is greater than marginal cost, profits will rise by increasing output, and if marginal revenue is less than marginal cost, profits will fall by expanding output. In the short run, firms may earn abnormal profits by entering the market or incur losses by leaving the industry, but in the long run profits are driven to zero through free entry and exit.
Monoply
Here are the key points about costly price discrimination:
- If price discrimination involves costs, it may no longer be profitable for the firm to engage in it. The costs of discrimination must be less than the additional profits it generates.
- As discrimination costs rise, the firm will find it optimal to discriminate less, charging a smaller number of different prices or targeting fewer customer groups. In the limit of very high costs, it may charge a single undifferentiated price.
- This means the firm's output and total welfare may be lower when price discrimination is costly compared to if it could costlessly perfectly price discriminate. Output could fall short of the efficient competitive level.
- Consumers who are charged higher prices as
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Agri 2312 chapter 9 market equilibrium and product price imperfect competition
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Oligopoly lesson 6a
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.
Oligopoly
Oligopoly is a market structure with a small number of firms producing similar or identical products. Barriers to entry, both natural and legal, limit competition and allow firms to be interdependent. With few competitors, oligopolistic firms are aware of and influence each other through pricing decisions. They may cooperate through explicit or implicit collusion like cartels to increase profits, though cartels are illegal. Models like the kinked demand curve and dominant firm theory explain oligopolistic behavior and pricing.
Monopolistic And Oligopoly
- Monopolistic competition describes a market with many producers offering similar but differentiated products, with each firm having some control over price. Barriers to entry are low, allowing firms to freely enter and exit the market.
- In the short run, firms maximize profits where marginal revenue equals marginal cost. In the long run with free entry and exit, firms earn zero economic profit as supply and demand equilibrate.
- Oligopoly is dominated by a few large firms. These firms are interdependent and must consider competitors' responses in decision making. Barriers to entry allow oligopolies to persist and earn economic profits.
12 2 oligopoly
Oligopolies are markets with a small number of interdependent firms. There is no single model of oligopoly behavior. 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. Game theory uses strategic decision making to analyze how firms in an oligopoly consider rivals' responses. The prisoner's dilemma demonstrates how cooperation can be difficult to achieve. Implicit collusion through price leadership or sticky prices also influences oligopoly behavior.
Market forms
Perfect Competitive Market, Pure Competitive Market, Monopoly, Duopoly, Monopolistic Competition, Oligopoly, Bilateral Monopoly
Oligopoly
This document defines and describes oligopoly, a market form dominated by a small number of interdependent sellers. An oligopoly lies between perfect competition and monopoly. It discusses the characteristics of oligopolies including profit maximization and ability to influence prices. The document also outlines different types of oligopolies such as pure/differentiated and collusive/non-collusive. It provides examples of oligopolies in industries like petroleum, telecommunications, and banking.
Market structure and its features
The document discusses market structure under perfect competition. It begins by defining key terms like market, market structure, and the two types of market structures - perfect competition and imperfect competition.
Under perfect competition, the market has several characteristics - homogeneous products, free entry and exit of firms, perfect information, and firms being price takers. The demand curve for an individual firm is horizontal, as it is a price taker. Equilibrium occurs where MR=MC and firms earn only normal profits in the long run. Changes in demand or supply can shift the equilibrium.
The document then discusses monopoly as an example of imperfect competition. Under monopoly there is a single seller, barriers to entry, no close substitutes, and
Oligopoly market analysis
The presentation sums up the telecom sector in India till 2015 and how the oligopoly market wars goes between the top companies. Also the kinked demand curve that is generated due to oligopoly market analysis. It has got it all!
Price ditermination
Detailed presentation on how price is determined, factors effecting price.
The price determination under following markets,
1). Perfect Competition
2). Monopoly
3). Duopoly
4). Oligopoly
have been described in detail.
Price Determination Under Short & Long Period, Cournot Model & Stackelberg Model are also discussed.
Monopoly, Monopolistic Competition and Oligopoly
This document discusses different market structures: monopoly, monopolistic competition, and oligopoly. For monopoly, it describes characteristics like a single seller, barriers to entry, and profit maximization where marginal revenue equals marginal cost. Monopolistic competition has many firms that produce differentiated products and free entry/exit. Oligopoly has a few sellers producing either homogeneous or differentiated products and difficult market entry.
Barriers to Entry and Exit
Barriers to entry and exit protect existing firms and allow them to maintain high profits. They include economies of scale, brand loyalty, and control of important technologies. Google faces few barriers to entry in search due to its vast scale and vertical integration advantages over potential competitors. Firms use strategies like limit pricing, predatory pricing, and brand proliferation to discourage competition. Industries with high minimum efficient scale and falling average costs are less contestable due to barriers to entry. Established firms have cost advantages from learning, integration, and scale that make entry difficult for competitors. Plant closures occur when price falls below average costs, showing the shutdown price.
Dirty Little Startup Secret: Barriers to entry
This document outlines various strategies that startups can use to erect barriers to entry for competitors. It discusses both legal/government barriers, such as intellectual property, trade regulations, and reciprocity with powerful players, as well as supply chain barriers like controlling raw materials, talent, manufacturing, and retail real estate. Additional barriers include customer lock-in through branding, switching costs, and network effects, as well as general barriers like vaporware announcements, developing a reputation for retribution, moving faster than competitors, and outspending rivals. However, the document notes vulnerabilities for each strategy.
Price Determination
The document discusses the concepts of supply and demand. It states that as price increases, demand decreases, and as price decreases, demand increases. Conversely, as price increases, supply increases, and as price decreases, supply decreases. The document explains that consumers buy more of something when it is cheaper to minimize expenses and maximize utility, while producers sell more of something when the price is higher to minimize costs and maximize profits. The equilibrium price is reached where the quantity demanded equals the quantity supplied. [/SUMMARY]
Oligopoly: Price leadership, its types and difficult
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.
Oligopoly
This document discusses oligopolistic market structures and provides examples of cartels. It summarizes that an oligopoly is characterized by a small number of firms producing either homogeneous or heterogeneous products. A cartel is an explicit agreement among firms in an oligopoly to fix prices, output levels, or market shares. Examples of successful cartels mentioned are OPEC and De Beers. The document also discusses collusion, game theory, and provides an example of cellular operators in India engaging in collusive practices.
Oligopoly Presentation
This document discusses the concept of oligopoly and provides examples. It defines oligopoly as a market structure with a few firms and many buyers. It notes that firms in an oligopoly are mutually interdependent and considers factors like price, competition, relationships between firms, and economic scale. It provides graphs to illustrate concepts like kinked demand curves and marginal revenue curves. It gives common examples of oligopolistic industries and compares oligopoly to monopoly, perfect competition, and monopolistic competition.
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Oligopoly: Price leadership, its types and difficult
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Chapter 13A monopolistically competitive market is characterized.docx
Chapter 13
A monopolistically competitive market is characterized by:
· many buyers and sellers,
· differentiated products, and
· easy entry and exit.
The monopolistically competitive market is similar to perfect competition in that there are many buyers and sellers who can enter or leave the market easily in response to economic profits or losses. A monopolistically competitive firm, though, is similar to a monopoly in that it produces a product that is different from that produced by all other firms in the market. The restaurant market in New York City provides a good example of a monopolistically competitive market. Each restaurant has its own recipes, decor, ambiance, etc. but also must compete with many other similar restaurants.
Because each firm produces a differentiated product, it won't lose all of its customers if it raises its prices. Thus, a monopolistically competitive firm faces a downward sloping demand curve for its product. As noted in Chapters 8 and 10, whenever a firm faces a downward sloping demand curve, its marginal revenue curve lies below its demand curve. The diagram below illustrates the relationship that exists between a monopolistically competitive firm's demand and marginal revenue curves.
While the diagram above seems similar to the demand and marginal revenue curves facing a monopolist, there is a critical difference. In a monopolistically competitive market, the number of firms changes as firms enter or leave the industry. When new firms enter the market, the customers are spread over a larger number of firms and the demand for each firm's product declines. An increase in the number of firms also tends to result in an increase in the elasticity of demand for each firm's products (since demand is more elastic when more substitutes are available). The diagram below illustrates the shift in a typical firm's demand curve that occurs when additional firms enter a monopolistically competitive market.
Short-run and long-run equilibrium in monopolistically competitive markets
Let's examine the determination of short-run equilibrium in a monopolistically competitive output market.
The diagram below illustrates a possible short-run equilibrium for a typical firm in a monopolistically competitive market. As with any profit-maximizing firm, a monopolistically competitive firm maximizes its profits by producing at a level of output at which MR = MC. In the diagram below, this occurs at an output level of Qo. The price is determined by the amount that customers are willing to pay to buy Qo units of output. In the example below, the demand curve indicates that a price of Po will be charged when Qo units of output are sold.
In a monopoly industry, economics profits could persist indefinitely due to the existence of barriers to entry. In a monopolistically competitive industry, however, the existence of economic profits results in the entry of additional firms into the industry. As additional firms enter, the demand for each ...
Regulation
Regulation content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics
Intro to Regulation
Price Capping: RPI-X & RPI+K
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Performance Targets
Self-Regulation
Pricing
The document discusses different market structures and pricing under each structure. It covers the four main market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. For each structure, it describes characteristics like number of firms, entry barriers, product differentiation. It then discusses pricing determination. Under perfect competition, firms are price takers and price equals marginal cost. Under monopoly, the single firm influences price by adjusting output to where marginal revenue equals marginal cost. Under monopolistic competition, in the short run firms maximize profits where marginal revenue equals marginal cost, and in the long run price equals average cost.
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The document discusses the concept of perfect competition in economics. It provides the key characteristics that define a perfectly competitive market including that there are many small firms, no barriers to entry or exit, identical products, and complete information. Firms are price takers and seek to maximize profits by producing where marginal cost equals marginal revenue. In the long run, perfect competition leads to zero economic profits as new firms enter if profits are positive and firms exit if losses occur.
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Price takers are firms that must accept the market price and have no control over price setting. Their output is small relative to the market for homogeneous goods like wheat, oil, or beef. Price searchers face a downward sloping demand curve and may be larger firms producing differentiated products like Nike or Coke. Most markets involve price searching firms. Perfect competition in price taker markets leads to efficient resource allocation and benefits consumers through low prices and new firm entry. Profits and losses communicate market signals, rewarding efficient firms and penalizing inefficient ones. This competitive process improves productivity and living standards over the long run.
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The document discusses market structures, specifically perfect competition. It defines key characteristics of perfect competition including a large number of small firms, homogeneous products, free entry and exit, and firms being price takers. Under perfect competition, each firm's demand curve is perfectly elastic and marginal revenue equals price. Firms produce where price equals marginal cost to maximize profits. In the long run, normal profits are achieved as entry and exit cause supply to equal demand. Perfect competition leads to allocative and productive efficiency.
Marketstructures
There are 4 main types of market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. Perfect competition is characterized by many small firms, homogeneous products, free entry and exit, and perfect information. Under perfect competition, firms are price takers and marginal revenue equals price. In both the short run and long run, firms will produce where marginal cost equals marginal revenue to maximize profits. The perfectly competitive market leads to productive and allocative efficiency.
Market structure
- A market is defined as the interaction between buyers and sellers of a product where the price tends to be uniform. Market structure depends on the number of firms, nature of products, barriers to entry, and degree of price control.
- Under perfect competition there are many small firms, homogeneous products, free entry and exit, and no single firm can influence price. Equilibrium occurs where marginal cost equals price.
- Monopoly is characterized by a single firm, no close substitutes, and high barriers to entry. The monopolist's equilibrium occurs where marginal revenue equals marginal cost and price is above marginal cost.
Marketstructure
The document discusses different market structures including perfect competition, monopoly, oligopoly, and monopolistic competition. It describes the key characteristics of each structure such as the number of firms, product differentiation, barriers to entry, and firm behavior. Perfect competition has many small firms, identical products, and firms are price takers. A monopoly has a single dominant firm with barriers to entry. Oligopoly is dominated by a small number of large firms where behavior is interdependent. Monopolistic competition has many differentiated products and easy entry/exit.
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This document provides an overview of different market structures, with a focus on perfect competition. It defines key concepts related to revenue, costs, and profit maximization for firms in competitive markets. Perfect competition is characterized by many small firms, homogeneous products, free entry and exit, and perfect information. Under perfect competition, firms are price takers and marginal revenue equals price. Equilibrium occurs where marginal cost equals marginal revenue. The document also discusses long-run equilibrium and how perfect competition leads to allocative efficiency.
Marketstructure
The document discusses different market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It describes the key characteristics of each structure such as the number of firms, level of product differentiation, barriers to entry/exit, and firm behavior. Perfect competition has many small firms, homogeneous products, free entry/exit, and firms are price takers. Monopoly has a single firm with barriers to entry and some control over price. Monopolistic competition and oligopoly involve multiple firms with varying degrees of product differentiation and imperfect competition.
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The document discusses different market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It describes the key characteristics of each structure such as the number of firms, level of product differentiation, barriers to entry/exit, and firm behavior. Perfect competition has many small firms, homogeneous products, free entry/exit, and firms are price takers. Monopoly has a single firm with barriers to entry and some control over price. Monopolistic competition and oligopoly involve multiple firms with varying degrees of product differentiation and imperfect competition.
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The document discusses different market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It describes the key characteristics of each structure such as the number of firms, level of product differentiation, barriers to entry/exit, and firm behavior. Perfect competition has many small firms, homogeneous products, free entry/exit, and firms are price takers. Monopoly has a single firm with barriers to entry and some control over price. Monopolistic competition and oligopoly involve multiple firms with varying degrees of product differentiation and imperfect competition.
14
The document discusses the characteristics and behavior of firms in a perfectly competitive market. It explains that in the short run, a competitive firm will shut down if price is below average variable cost, while in the long run it will exit the market if price is below average total cost. The firm's marginal cost curve represents its supply curve. The market supply curve is determined by the summation of individual firms' supply. In the long run, free entry and exit will drive profits to zero.
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The document discusses key concepts relating to perfect competition, including:
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- In the long-run, if profits exist, entry by new firms will increase supply and drive prices down until profits are eliminated
Monopolistic Competition SFLS online
II.) Monopolistic competition is characterized by many small businesses that produce differentiated products with weak barriers to entry. In the short run, firms behave similarly to monopolies by producing where marginal revenue equals marginal cost. However, in the long run competition drives economic profits to zero as entry and exit occurs. While monopolistic competition provides variety for consumers, it is less efficient than perfect competition due to excess capacity and markups pricing above marginal cost.
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The equilibrium is (Low, Low). This is because at (Low, Low) neither firm has an incentive to unilaterally change its strategy. While (High, High) would be more profitable, each firm would have an incentive to deviate from this strategy by choosing Low. For the equilibrium to be stable, no firm should have an incentive to deviate - which is true at (Low, Low) but not at (High, High).
Session 10 firms in competitive markets
A perfectly competitive market has many small firms, identical products, and free entry and exit. Each firm is a price taker and maximizes profits by producing where marginal revenue equals marginal cost. In the short run, firms will shut down if price is below average variable cost, while in the long run firms will exit if price is below average total cost. Market supply results from the aggregation of individual firm supplies. In the long run, entry and exit of firms drives the market to equilibrium with zero profits.
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Perfect competition is a market structure characterized by numerous small firms, homogeneous products, free entry and exit of firms, and perfect information. Under perfect competition, firms are price takers and cannot influence the market price. The equilibrium price is determined where industry demand equals industry supply and firms produce where price equals marginal cost, resulting in an efficient allocation of resources.
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Chapter 13A monopolistically competitive market is characterized.docx
Chapter 13A monopolistically competitive market is characterized.docx
Olig
- 1. Oligopoly
- 2. Oligopoly few firms either homogeneous or differentiated products interdependence of firms - policies of one firm affect the other firms substantial barriers to entry examples: auto industry and cigarette industry
- 3. Collusion and Competition Oligopoly firms may collude (act as a monopoly) and earn positive profits. OR Oligopolists may compete with each other and drive prices down to where profits are zero.
- 4. While it pays for firms to collude, in order to earn positive profits, it also pays to cheat on the collusive agreement. If one firm cuts its price to slightly below the others, it could gain a lot of business. If everyone cheats on the agreement, however, the agreement falls apart.
- 5. Collusive agreements less likely to succeed when secret price cuts are difficult and costly to detect. (Quality changes are difficult to monitor.) market conditions are unstable. (Differences in expectations make it difficult to reach an agreement.) vigorous antitrust action increases the cost of collusion.
- 6. Some oligopolistic markets operate in a situation of price leadership. A single firm sets industry price and the remaining firms charge the same price as the leader.
- 7. Sweezy’s kinked demand curve model of oligopoly Assumptions: 1. If a firm raises prices, other firms won’t follow and the firm loses a lot of business. So demand is very responsive or elastic to price increases. 2. If a firm lowers prices, other firms follow and the firm doesn’t gain much business. So demand is fairly unresponsive or inelastic to price decreases.
- 8. The Kinked Demand Curve quantity $ D P* Q*
- 9. MR Curve for the top part of the Demand Curve quantity $ D MR P* Q*
- 10. Drawing MR Curve for the bottom part of the Demand Curve quantity $ D MR P* Q*
- 11. MR Curve for the bottom part of the Demand Curve quantity $ D MR P* Q*
- 12. The Kinked Demand Curve and the MR Curve quantity $ D MR Q* P*
- 13. The MC curve intersects the MR curve in the vertical segment. quantity $ D MR Q* P* MC
- 14. If costs shift up slightly, but MC still intersects MR in the vertical segment, there will be no quantity $ D MRQ* P* MC MC’ change in price. This price rigidity is seen in real world oligopoly markets.
- 15. The ATC curve can be added to the graph. To show positive profits, part of ATC curve must lie under part of the demand curve. quantity $ D MRQ* P* MC ATC
- 16. The ATC* value can be found on the ATC curve above Q*. quantity $ D MRQ* P* MC ATC ATC*
- 17. TC = ATC . Q quantity $ D MRQ* P* MC ATC ATC*
- 18. TR = P . Q quantity $ D MRQ* P* MC ATC ATC*
- 19. Profit = TR - TC quantity $ D MRQ* P* MC ATC ATC* profit
- 20. To show a firm with a loss, the ATC curve must be entirely above the demand curve. quantity $ D MRQ* P* MC ATC ATC* loss AVC
- 21. To show a firm breaking even, the ATC curve must be tangent to the demand curve at the kink. quantity $ D MRQ* ATC*= P* MC ATC
- 22. Profit Possibilities for the Oligopolist short run: positive profits, losses, or breaking even. long run: positive profits, or breaking even.
- 23. Four-Firm Concentration Ratio percentage of total industry sales accounted for by the four largest firms of an industry.
- 24. Example: The four largest firms in the car rental industry account for 94% of all car rentals in the U.S. So, the four-firm concentration ratio for the car rental industry is 94. Hertz Avis National Budget
- 25. Example Suppose a market consists of seven firms with the following shares: 5 5 10 10 20 25 25 The four firm concentration ratio would be CR = 25 + 25 + 20 + 10 = 80
- 26. Herfindahl Index (H) measures the extent to which a market is dominated by a few firms. H = s1 2 + s2 2 + s3 2 + ... + sn 2 where s1 2 is the square of the share of firm 1, and there are n firms.
- 27. The Herfindahl Index can be close to zero if there are many, very small firms in an industry. The Herfindahl index for a monopolized industry is H = s1 2 = 100 2 = 10,000.
- 28. Example Consider again our seven-firm market. (shares: 5 5 10 10 20 25 25 ) Then the Herfindahl Index would be H = 52 + 52 + 102 + 102 + 202 + 252 + 252 = 1900
- 29. Justice Department Guidelines A market is considered concentrated if H > 1800. A market is considered unconcentrated if H < 1000.
- 30. Example Our 7 firm case had a Herfindahl index of 1900. The industry is concentrated since 1900 > 1800.
- 31. For unconcentrated markets: a merger would be challenged by the antitrust division of the justice department if it would increase the Herfindahl index by 200 or more. For concentrated markets: a merger would be challenged by the antitrust division of the justice department if it would increase the Herfindahl index by 100 or more.
- 32. Example Back to our 7 firms (shares: 5, 5, 10, 10, 20, 25, 25). The industry was concentrated since 1900 > 1800. Suppose the two firms with the 10% shares want to merge. Then the shares would be 5, 5, 20, 20, 25, 25. H = 5 2 + 52 + 202 + 202 + 252 + 252 = 2100 This is an increase of 200 in the Herfindahl index and the merger would be challenged by the antitrust division.
- 33. Three Types of Mergers
- 34. Horizontal Merger the combination under one ownership of the assets of two or more firms engaged in the production of similar products example: two steel manufacturing companies merging
- 35. Vertical Merger the creation of a single firm from two firms, one of which was a supplier of the other example: a lumber company and a builder merging
- 36. Conglomerate Merger the combining under one ownership of two or more firms that produce unrelated products example: a tire manufacturer and a coffee company merging