101 lecture 17 oligopoly
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Transcript of 101 lecture 17 oligopoly
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DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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DMR
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Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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DMR
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Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
Profit
Perfect Competition
Perfect Competition$
Quantity
P
Perfect Competition$
Quantity
Demand=MR
P
Perfect Competition$
Quantity
Demand=MR
1. MR=MC?
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?
Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?
Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q
Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q
Total Revenue
Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
Total Cost
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
Total Cost
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
Total Cost
$
Quantity
ProfitDemand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Monopoly$
Q
Monopoly$
Q
Demand
Marginal Revenue MR
Monopoly$
Q
Demand
Marginal CostMC
Marginal Revenue MR
Monopoly$
Q
Demand
Marginal CostMC
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
Marginal CostMC
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
Marginal CostMC
Q
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?2. TR= P x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
Consumer Surplus
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
Consumer Surplus
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
Deadweight Loss
Consumer Surplus
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
Q
$Short Run
DMR
Monopolistic Competition
Q
$Short Run
DMR
MC
Monopolistic Competition
Q
$Short Run
DMR
MC
Monopolistic Competition
Q
$Short Run
DMR
MC
QS
Monopolistic Competition
Q
$Short Run
DMR
MC
QS
Monopolistic Competition
Q
$Short Run
DMR
MC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATCProfit
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATCProfit
High PriceLarge Quantity
QS
PS
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATCProfit
High PriceLarge Quantity
QS
PS
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PPSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
PPSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$
Monopolistic Competition
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
QLR
PLR
Microeconomics
Oligopoly
Few to Sell
PerfectCompetition
MonopolyMonopolisticCompetition
Oligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Brands Similar
Ease of Entry Easy Blocked Easy Hard
Demand D = MR D > MR Dynamic Game Theory
ExamplesCommodities
RiceApples
UtilitiesGovernment
BrandsCokeApple
STC-MobilyHyperPanda
Danube
Pairs
Collusion Dominant Strategy Nash Equilibrium Cooperative Equilibrium Non-cooperative Equilibrium
Key Terms
Oligopoly
Oligopoly
Small number of interdependent firms
compete
Oligopoly
Oligopoly
Cannot use usual methods
Demand curves not obviousComplex Strategy
Oligopoly
Oligopoly
Don’t know Demand Curve
Don’t know Marginal Revenue curve
Don’t know where to find profit maximization point
Eddie
Willie
Betrays
Willie1 Year
Silent
Silent
Betrays
Eddie1 Year
EddieGoes Free
Willie10 Years
WillieGoes Free
Eddie10 Years
Willie5 Years
Eddie5 Years
Prisoner's
Dilemma
Prisoner's Dilemma
Prisoner's Dilemma
Pursuing the Dominant Strategy Results in Non-Cooperation
and Leaves Everyone Worse Off
Game Theory
Game Theory
RulesStrategies
Payoffs
John Nash(1928 - )
Game TheoryNash Equilibrium
Nobel 1994
A Beautiful Mind
Duoploy
Duoploy
Two Sellers
Profits Attract
Competition
Five Competitive Forces
Five Competitive Forces
Existing Firms Potential Firms
Substitutes Buyers
Suppliers
100
150Mobily1,000
150
STC1,000
100
Mobily500
Mobily2,000
Mobily700
STC2,000
STC500
STC700