Você está na página 1de 29

Three Oligopoly Models

Kinked Demand Curve


23
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory

Cartels and Other Collusion


Price Leadership Model
Oligopoly and Efficiency
Last Word

Monopolistic
Competition
Key Terms
and Oligopoly
End Show

23-1 Copyright 2008 The McGraw-Hill Companies


Chapter Objectives
• Characteristics of Monopolistic
Competition
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
• Why Monopolistic Competitors
Three Oligopoly ModelsEarn Only a Normal Profit in the
Kinked Demand Curve
Long-Run
Cartels and Other Collusion

• Characteristics of Oligopoly
Price Leadership Model
Oligopoly and Efficiency
Last Word
• How Game Theory Relates to
Oligopoly
• Why the Demand Curve of the
Oligopolist May Be Kinked
• Incentives and Obstacles to
Collusion Among Oligopolists
• Potential Positive and Negative
Key Terms

End Show
Effects of Advertising
23-2 Copyright 2008 The McGraw-Hill Companies
Monopolistic Competition
• Characteristics
Monopolistic Competition
O 23.1

– Small Market Shares


Monopolistic Competition and Efficiency
Oligopoly

– No Collusion
Game Theory
Three Oligopoly Models
Kinked Demand Curve
Cartels and Other Collusion
Price Leadership Model
– Independent Action
• Differentiated Products
Oligopoly and Efficiency
Last Word

– Product Attributes
– Service
– Location
– Brand Names and
Key Terms Packaging
End Show – Some Control Over Price
23-3 Copyright 2008 The McGraw-Hill Companies
Monopolistic Competition
• Easy Entry and Exit
Monopolistic Competition
Monopolistic Competition and Efficiency
O 23.1

Oligopoly
Game Theory
• Advertising
Three Oligopoly Models
Kinked Demand Curve

–Nonprice Competition
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
Last Word

• Monopolistically
Competitive Industries

Key Terms

End Show

23-4 Copyright 2008 The McGraw-Hill Companies


Price and Output Determination
In Monopolistic Competition
• The Firm’s Demand
Monopolistic Competition
Monopolistic Competition and Efficiency

Curve
Oligopoly
Game Theory
Three Oligopoly Models
Kinked Demand Curve
• The Short Run:
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
Last Word –Profit or Loss
• The Long Run:
–Only a Normal Profit
–Profits: Firms Enter
–Losses: Firm’s Leave
Key Terms
• Complications G 23.1

End Show
–Product Variety
23-5 Copyright 2008 The McGraw-Hill Companies
Price and Output Determination
In Monopolistic Competition
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly Short-Run Profits
Game Theory
Three Oligopoly Models ATC
Kinked Demand Curve MC
Cartels and Other Collusion
Price Leadership Model
Price and Costs

Oligopoly and Efficiency


Last Word P1
A1

Economic D1
Profit
MR = MC

MR

Key Terms
0 Q1
End Show
Quantity
23-6 Copyright 2008 The McGraw-Hill Companies
Price and Output Determination
In Monopolistic Competition
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly Short-Run Losses
Game Theory
Three Oligopoly Models ATC
Kinked Demand Curve MC
Cartels and Other Collusion
Price Leadership Model
A
Price and Costs

Oligopoly and Efficiency 2


Last Word P2

Loss
D2

MR = MC

MR

Key Terms
0 Q2
End Show
Quantity
23-7 Copyright 2008 The McGraw-Hill Companies
Price and Output Determination
In Monopolistic Competition
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly Long-Run Equilibrium
Game Theory
Three Oligopoly Models
Kinked Demand Curve MC
Cartels and Other Collusion ATC
Price Leadership Model
Price and Costs

Oligopoly and Efficiency


P3=
Last Word
A3

D3

MR = MC

MR

Key Terms
0 Q3
End Show
Quantity
23-8 Copyright 2008 The McGraw-Hill Companies
Monopolistic Competition
and Efficiency
Recall: P=MC=Minimum ATC
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory MC
Three Oligopoly Models
Kinked Demand Curve ATC
Cartels and Other Collusion
Price and Costs

Price Leadership Model P3=


Oligopoly and Efficiency A3
Last Word P4

Price is Higher
D3

MR = MC
Excess Capacity at
Minimum ATC MR
0 Q3 Q4
Key Terms
Quantity
End Show
Monopolistic Competition is Not Efficient
23-9 Copyright 2008 The McGraw-Hill Companies
Oligopoly
• Characteristics
Monopolistic Competition

Oligopoly
Game Theory
– A Few Large Producers
Monopolistic Competition and Efficiency

Three Oligopoly Models


Kinked Demand Curve
– Homogeneous or
Cartels and Other Collusion
Price Leadership Model Differentiated Products
Oligopoly and Efficiency
Last Word • Homogeneous Oligopoly
• Differentiated Oligopoly
– Control Over Price, But
Mutual Interdependence
• Strategic Behavior
Key Terms – Entry Barriers
End Show
– Mergers
23-10 Copyright 2008 The McGraw-Hill Companies
Measures of Concentration
• Concentration Ratio
Monopolistic Competition
Monopolistic Competition and Efficiency

• Localized Markets
Oligopoly
Game Theory
Three Oligopoly Models
Kinked Demand Curve

• Interindustry
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
Last Word
Competition
• World Trade
–Import Competition
Key Terms
• Herfindahl Index W 23.1

End Show (%S1)2 + (%S2)2 + (%S3)2 + … + (%Sn)2


23-11 Copyright 2008 The McGraw-Hill Companies
Game Theory
Game Theory Model to Analyze
Monopolistic Competition
Behavior
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
RareAir’s Price Strategy
• 2 Competitors
Three Oligopoly Models
High Low
Kinked Demand Curve
• 2 Price
Cartels and Other Collusion
Strategies

Uptown’s Price Strategy


Price Leadership Model A B
• Each Strategy
Oligopoly and Efficiency $12 $15
Last Word
Has a Payoff High
Matrix $12 $6
• Greatest
Combined
C D
Profit $6 $8
• Independent Low
Actions $15 $8
Stimulate a
Key Terms
Response
End Show
O 23.2
23-12 Copyright 2008 The McGraw-Hill Companies
Game Theory
Game Theory Model to Analyze
Monopolistic Competition
Behavior
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
RareAir’s Price Strategy
• Independently
Three Oligopoly Models
High Low
Kinked Demand Curve
Lowered Prices
Cartels and Other Collusion
in Expectation

Uptown’s Price Strategy


Price Leadership Model A B
Oligopoly and Efficiency $12 $15
of Greater
Last Word
Profit Leads to High
the Worst $12 $6
Combined
Outcome
• Eventually Low C D
$6 $8
Outcomes Low
Make Firms $15 $8
Return to
Key Terms
Higher Prices
End Show
O 23.2
23-13 Copyright 2008 The McGraw-Hill Companies
Game Theory
•Role of Mutual
Monopolistic Competition
Monopolistic Competition and Efficiency

Interdependence
Oligopoly
Game Theory
Three Oligopoly Models

•Collusive Tendencies
Kinked Demand Curve
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
Last Word
– Collusion
•Incentive to Cheat G 23.2

Key Terms

End Show

23-14 Copyright 2008 The McGraw-Hill Companies


Three Oligopoly Models
• Kinked Demand Curve
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
• Collusive Pricing
Three Oligopoly Models
Kinked Demand Curve
Cartels and Other Collusion

• Price Leadership
Price Leadership Model
Oligopoly and Efficiency
Last Word

• Diversity of
Oligopolies
• Complications of
Interdependence
Key Terms

End Show

23-15 Copyright 2008 The McGraw-Hill Companies


Kinked-Demand Curve
Noncollusive Oligopoly
• Strategies
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly

–Match Price Changes


Game Theory
Three Oligopoly Models
Kinked Demand Curve
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
–Ignore Price Changes
Last Word
• A Combined Strategy
• Price Inflexibility
• The Kinked-Demand
Key Terms
Curve
End Show Graphically…
23-16 Copyright 2008 The McGraw-Hill Companies
Kinked-Demand Curve
Noncollusive Oligopoly
Monopolistic Competition
Competitor and Rivals Strategize Versus Each Other
Monopolistic Competition and Efficiency
Oligopoly Consumers Effectively Have 2 Partial Demand Curves
Game Theory and Each Part Has Its Own Marginal Revenue Part
Three Oligopoly Models
Kinked Demand Curve
Cartels and Other Collusion Rivals Ignore
Price Leadership Model Price Increase

Price and Costs


Oligopoly and Efficiency D2 MC1
Last Word e e
P0 P0
Price

MR2 f
f
D2 MC2

MR2
Rivals Match g
Price Decrease g
D1 D1
0 Q0 MR1 0 Q0 MR1
Quantity Quantity

Key Terms Resulting in a Kinked-Demand Curve


to the Consumer – Price and Output
End Show
Are Optimized at the Kink
23-17 Copyright 2008 The McGraw-Hill Companies
Kinked-Demand Curve
Noncollusive Oligopoly
• Criticisms of the Model
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
Three Oligopoly Models
Kinked Demand Curve
–Doesn’t Explain How
Cartels and Other Collusion
Price Leadership Model Price Gets to the Kink
(P0)
Oligopoly and Efficiency
Last Word

–Oligopoly Prices Are Not


As Rigid During
Instability as the Model
Key Terms
Indicates
End Show –Possibility of Price Wars
23-18 Copyright 2008 The McGraw-Hill Companies
Cartels and Other Collusion
• Price and Output
–Collusion and Tendency
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
Three Oligopoly Models Toward Joint-Profit
Maximization
Kinked Demand Curve
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
Last Word MC Effectively Sharing
The Monopoly Profit
Price and Costs

P0 ATC

A0

MR=MC
Economic
Key Terms Profit MR D

End Show Q0
Quantity
23-19 Copyright 2008 The McGraw-Hill Companies
Cartels and Other Collusion
• Overt Collusion
Monopolistic Competition
– Cartels
Monopolistic Competition and Efficiency

– The OPEC Cartel


Oligopoly
Game Theory
Three Oligopoly Models
Kinked Demand Curve
Cartels and Other Collusion
GLOBAL PERSPECTIVE
Price Leadership Model
The 11 OPEC Nations
Oligopoly and Efficiency
Daily Oil Production, May 2006
Last Word Country Barrels of Oil
Saudi Arabia 9,099,000
Iran 4,110,000
Venezuela 3,233,000
UAE 2,444,000
Nigeria 2,306,000
Kuwait 2,247,000
Iraq 1,903,000
Libya 1,500,000
Key Terms Indonesia 1,451,000
Algeria 894,000
End Show Qatar 726,000
Source: OPEC
23-20 Copyright 2008 The McGraw-Hill Companies
Cartels and Other Collusion
• Covert Collusion
–Tacit Understandings
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
• Obstacles to Collusion
Three Oligopoly Models
Kinked Demand Curve
–Demand and Cost
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
Last Word Differences
–Number of Firms
–Cheating
–Recession
–Potential Entry
Key Terms
–Legal Obstacles:
End Show
• Antitrust Law
23-21 Copyright 2008 The McGraw-Hill Companies
Price Leadership Model
• Leadership Tactics
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory • Infrequent Price
Three Oligopoly Models
Kinked Demand Curve
Changes
Cartels and Other Collusion
Price Leadership Model

• Communications
Oligopoly and Efficiency
Last Word

• Limit Pricing
• Breakdowns in Price
Key Terms
Leadership:
End Show –Price Wars
23-22 Copyright 2008 The McGraw-Hill Companies
Oligopoly and Advertising
• Advertising Prevalent in
Monopolistic Competition
Monopolistic Competition and Efficiency

Monopolistic
Oligopoly
Game Theory
Three Oligopoly Models
Kinked Demand Curve

Price Leadership Model Competition and


Cartels and Other Collusion

Oligopoly and Efficiency


Last Word
Oligopoly
• Positive Effects of
Advertising
Key Terms
• Potential Negative
End Show Effects of Advertising
23-23 Copyright 2008 The McGraw-Hill Companies
Oligopoly and Advertising
The Largest U.S. Advertisers, 2005
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly Advertising Spending
Game Theory
Three Oligopoly Models Company Millions of $
Kinked Demand Curve
Cartels and Other Collusion
Price Leadership Model
Proctor and Gamble $4609
Oligopoly and Efficiency General Motors 4353
Last Word
Time Warner 3494
Verizon 2484
AT&T 2471
Ford Motor 2398
Walt Disney 2279
Johnson & Johnson 2209
Key Terms GlaxoSmithKline 2194
End Show DaimlerChrysler 2179
Source: Advertising Age
23-24 Copyright 2008 The McGraw-Hill Companies
Oligopoly and Advertising
World’s Top 10 Brand Names
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
GLOBAL PERSPECTIVE
Game Theory
Three Oligopoly Models
Kinked Demand Curve
Coca-Cola
Cartels and Other Collusion
Price Leadership Model
Microsoft
Oligopoly and Efficiency
Last Word
IBM
General Electric
Intel
Nokia
Toyota
Disney
Key Terms McDonalds
End Show Mercedes-Benz
Source: Interbrand
23-25 Copyright 2008 The McGraw-Hill Companies
Oligopoly and Efficiency
• Productive and Allocative
Monopolistic Competition
Efficiency
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
Three Oligopoly Models P = MC = Minimum ATC
– Neither Exists
Kinked Demand Curve
Cartels and Other Collusion
Price Leadership Model
• Tendency to Share the
Oligopoly and Efficiency
Last Word

Monopoly Profit
• Qualifications
– Increased Foreign
Competition
Key Terms – Limit Pricing
End Show
– Technological Advance
23-26 Copyright 2008 The McGraw-Hill Companies
Oligopoly in the Beer Industry
a s t • Once Hundreds of Firms Now a
L
o rd Very Small Group
W
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
• Demand Side Changes
Three Oligopoly Models – Taste Shifts to Lighter Beers of
Kinked Demand Curve
Cartels and Other Collusion Large Breweries
Price Leadership Model
Oligopoly and Efficiency
– Shift From Tavern-Tap
Last Word Consumption to Can or Bottles
• Supply Side Changes
– Technology Increased Minimum
Efficient Scale Creating a Barrier
to Entry
– National Brands Enjoy Cost
Advantages
Key Terms
• Consolidation of Firms into
End Show
Oligopoly
23-27 Copyright 2008 The McGraw-Hill Companies
Key Terms
• monopolistic competition • interindustry competitio
• product differentiation • import competition
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly • nonprice competition • Herfindahl index
Game Theory
• excess capacity
Three Oligopoly Models • game-theory model
Kinked Demand Curve • oligopoly
Cartels and Other Collusion • collusion
• homogeneous oligopoly
Price Leadership Model
Oligopoly and Efficiency
• • kinked-demand curve
Last Word differentiated oligopoly
• strategic behavior • price war
• mutual interdependence • cartel
• concentration ratio • tacit understandings
• price leadership

Key Terms

End Show

23-28 Copyright 2008 The McGraw-Hill Companies


Next Chapter Preview…
Monopolistic Competition
Monopolistic Competition and Efficiency
Oligopoly
Game Theory
Three Oligopoly Models
Kinked Demand Curve
Cartels and Other Collusion
Price Leadership Model
Oligopoly and Efficiency
Last Word

Technology, R&D,
And Efficiency
Key Terms

End Show

23-29 Copyright 2008 The McGraw-Hill Companies

Você também pode gostar