Monopolistic and Oligopoly: © 2006 Thomson/South-Western
Monopolistic and Oligopoly: © 2006 Thomson/South-Western
Monopolistic and Oligopoly: © 2006 Thomson/South-Western
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© 2006 Thomson/South-Western
Monopolistic Competition
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Exhibit 1a: Maximizing Short-Run Profit
The monopolistically
competitive firm
produces the level of
output at which marginal
revenue equals marginal
cost (point e) and
charges the price
indicated by point b on
the downward-sloping
demand curve.
In panel (a), the firm
produces q units, sells
them at price p, and
earns a short-run
economic profit equal to
(p – c) multiplied by q,
shown by the blue
rectangle.
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Exhibit 1b: Minimizing Short-Run Loss
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Zero Economic Profit in the Long Run
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Comparison
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Oligopoly
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Varieties of Oligopoly
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Exhibit 4: Economies of Scale as a Barrier to Entry
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High Costs of Entry
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Models of Oligopolies
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Differences in Cost
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New Entry Into the Industry
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Cheating
Ben’s payoff is in
red and Jerry’s in
blue.
The incentive for
both to confess is the
dominant-strategy
equilibrium of the
game because each
player’s strategy
does not depend on
what the other does.
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Price Setting Game
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Exhibit 8: Cola War Payoff Matrix
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Tit-for-Tat Strategy
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Oligopoly and Perfect Competition
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Comparison of Market Structures
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