7/26/2019 Oligopoly & Monopolistic Competition - Chapter 10

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Oligopoly and

Imperfect Competition

Chapter 10

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Main topics:

Behavior of imperfect competitors

Effects of innovation & information

Welfare aspects

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Behavior of imperfect competitors

at!re of imperfect competition

" Costs

" Barriers to entry

" #trategic interaction

$heories

" Oligopoly " coll!sive & non%cooperative

" Monopolistic competition

rice discrimination

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Concentration 'atios (re

)!antitative Meas!res of Mar*et

o+er

Chapter 10

Figure 10-1

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(, Imperfect Competition

Meas!res of mar*et po+er

" Concentration ratios: e,g, -%firm concentration

" .erfindahl%.irschman Inde/ ..I

" Other ratios

at!re of imperfect competition

" Minim!m costs2vol!me

" Barriers to competition2entry

" #trategic interaction

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.erfindahl inde/

. 3 4 s5 3 4 6i2)5

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Coll!sive Oligopoly 7oo*s

M!ch 7i*e Monopoly

Chapter 10

Figure 10-2

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Monopolistic Competitors rod!ce

Many #imilar 8oods

Chapter 10

Figure 10-3

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9ree Entry of !mero!s

Monopolistic Competitors Wipes

O!t rofit

Chapter 10

Figure 10-4

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(, Imperfect Competition cont;d

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9irms Can Increase $heir rofits

thro!gh rice =iscrimination

Chapter 10

Figure 10-5

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Innovation & information

Behavior of large corporations

" #eparation of o+nership & control

Innovation information & #ch!mpeterianeconomics

" Economics of information

" Intellect!al property rights

" #ch!mpeterian hypothesis

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Welfare aspects

Economic costs of imperfect competition

" Inflated prices & positive economic profits

" Ins!fficient o!tp!t

Economic >enefits

" rod!ct variety

" Economies of scale & scope etc,

Interventions see later slides

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Monopolists Ca!se Economic

Waste >y 'estricting O!tp!t

Chapter 10

Figure 10-6

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erfect Competition

Chapter 10

Figure 10-7

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8overnment intervention

(nti%tr!st policy" 7egislative history

#herman (nti%tr!st (ct

'o>inson%atman (ct against ?restraint of trade@" 1A constit!tion

olicies to enco!rage competition

" E,g, Electricity distri>!tionD mo>ile phones 'eg!lation

" E,g, Energy reg!latory >oard

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8overnment intervention cont;d