Unit 10 Oligopoly

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1、10Oligopoly(PrinciplesofEconomics,Chapter17)BETWEENMONOPOLYANDPERFECTCOMPETITIONImperfectcompetitionreferstothosemarketstructuresthatfallbetweenperfectcompetitionandpuremonopoly.BETWEENMONOPOLYANDPERFECTCOMPETITIONImperfectcompetitionincludesindustriesinwhichfirmshavecompetitorsbutdonotfacesomuchcom

2、petitionthattheyarepricetakers.BETWEENMONOPOLYANDPERFECTCOMPETITIONTypesofImperfectlyCompetitiveMarketsOligopolyOnlyafewsellers,eachofferingasimilaroridenticalproducttotheothers.MonopolisticCompetitionManyfirmssellingproductsthataresimilarbutnotidentical.Figure1TheFourTypesofMarketStructureCopyright

3、©2004South-Western•Tapwater•CableTVMonopoly(Chapter15)•Novels•MoviesMonopolisticCompetition(Chapter17)•Tennisballs•CrudeoilOligopoly(Chapter16)NumberofFirms?Perfect•Wheat•MilkCompetition(Chapter14)TypeofProducts?IdenticalproductsDifferentiatedproductsOnefirmFewfirmsManyfirmsMARKETSWITHONLYAFEWSELLER

4、SBecauseofthefewsellers,thekeyfeatureofoligopolyisthetensionbetweencooperationandself-interest.MARKETSWITHONLYAFEWSELLERSCharacteristicsofanOligopolyMarketFewsellersofferingsimilaroridenticalproductsInterdependentfirmsBestoffcooperatingandactinglikeamonopolistbyproducingasmallquantityofoutputandchar

5、gingapriceabovemarginalcostADuopolyExampleAduopolyisanoligopolywithonlytwomembers.Itisthesimplesttypeofoligopoly.Table1TheDemandScheduleforWaterCopyright©2004South-WesternADuopolyExamplePriceandQuantitySuppliedThepriceofwaterinaperfectlycompetitivemarketwouldbedriventowherethemarginalcostiszero:P=MC

6、=$0Q=120gallonsThepriceandquantityinamonopolymarketwouldbewheretotalprofitismaximized:P=$60Q=60gallonsADuopolyExamplePriceandQuantitySuppliedThesociallyefficientquantityofwateris120gallons,butamonopolistwouldproduceonly60gallonsofwater.Sowhatoutcomethencouldbeexpectedfromduopolists?Competition,Monop

7、olies,andCartelsTheduopolistsmayagreeonamonopolyoutcome.CollusionAnagreementamongfirmsinamarketaboutquantitiestoproduceorpricestocharge.CartelAgroupoffirmsactinginunison.Competition,Monopolies,andCart