- •Lecture 9: monopoly, oligopoly and competition
- •1. Monopoly
- •How Monopoly Is Maintained: Barriers to Entry
- •3. Legal barriers to entry.
- •2. Perfect Competition
- •1. Both buyers and sellers are price takers.
- •2. No influence.
- •3. The number of firms is large.
- •4. No barriers to entry.
- •5. Homogeneous product.
- •6. Instantaneous exit and entry.
- •7. Complete information.
- •8. Profit-maximizing entrepreneurial firms.
- •3. Imperfect Competition
- •Monopolistic Competition
- •Price Discrimination
- •Examples of Monopolistically Competitive Markets
- •4. Oligopoly
- •Concentration ratios
- •The Competitive Spectrum
- •1. Cartel
- •Forming a Cartel: Directions and Difficulties
- •Cartels and Technological Change
- •2. Implicit Price Collusion
- •3. Price war
- •4. The Contestable Market Model
- •Comparison of the Contestable Market Model and the Cartel Model
- •Other Oligopoly Models
- •1) Price leadership
- •2) Price Rigidity: The Kinked Demand Curve Model
- •3) Entry-Limit Pricing
- •Advertising under Oligopoly
- •Summary:
Summary:
1. Market structure is the physical characteristics of the market within which firms interact. It involves the number of firms in the market, barriers to entry, and communication among firms.
2. Monopoly is a market structure in which one firm makes up the entire market. It is the polar opposite to competition. It is a market structure in which the firm faces no competitive pressure from other firms.
3. Competition as a process is a rivalry among firms. It involves one firm trying to figure out how to take away market share from another firm. Competition as a state, or market structure, is the end result of the competitive process under certain conditions. A perfectly competitive market is a market in which economic forces operate absolutely.
4. Imperfect competition exists when more than one seller competes for sales with other sellers of similar products, each of whom has some control over price. Individual sellers in such markets have a degree of monopoly power, which means they can influence on the price of their product by controlling its availability to buyers.
5. Monopolistic competition exists when many sellers compete to sell a differentiated product in a market into which the entry of new sellers is possible.
6. Oligopoly is a market structure in which a few sellers dominate in sales of a product and where entry of new sellers is difficult or impossible. The product can be either differentiated or standardized.