Escolar Documentos
Profissional Documentos
Cultura Documentos
Monopolistic
Competition
Key Terms
and Oligopoly
End Show
• 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
– 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
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
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
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
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 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
• 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
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
• Price Leadership
Price Leadership Model
Oligopoly and Efficiency
Last Word
• Diversity of
Oligopolies
• Complications of
Interdependence
Key Terms
End Show
MR2 f
f
D2 MC2
MR2
Rivals Match g
Price Decrease g
D1 D1
0 Q0 MR1 0 Q0 MR1
Quantity Quantity
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
• 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
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
Technology, R&D,
And Efficiency
Key Terms
End Show