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1、Chapter12:MonopolisticCompetitionandOligopolyCHAPTER12MONOPOLISTICCOMPETITIONANDOLIGOPOLYTEACHINGNOTESStudentsviewingthismaterialforthefirsttimecanbeoverwhelmedbecauseofthenumberofmodelspresented.Chapter12discussessevenmodels:monopolisticcompetition,Cournot-Nash,Stacke
2、lberg,Bertrand,non-cooperativegame,kinkeddemand,andpriceleadership.Youmightwanttoconcentrateyourattentioninclassonthemorebasicmodels,e.g.,monopolisticcompetition,Cournot-Nash,non-cooperativegame,andpriceleadership.Youcanotherwisepickandchooseamongthemodelsastimepermits
3、.Whenintroducingthematerialinthischapter,startbyreviewingthebasicresultsofthemodelsofcompetitionandmonopoly.Whenpresentingmonopolisticcompetition,focusonwhypositiveprofitsencourageentryandonthesimilaritiesanddifferencesofthismodelwithcompetitionandmonopoly.Theexampleof
4、brandcompetitionincolaandcoffeemarketspresentedattheendofSection12.2facilitatesaclassdiscussionofthecostsandbenefitsoffreedomofchoiceamongavastarrayofbrandnamesandtrademarks.Thechapterendswithtwotopicsthatinvokeopinionsfromalmosteverystudent:anapplicationonOPECandExamp
5、le12.5,“TheCartelizatonofIntercollegiateAthletics.”StudentsmayfindtheCournot-Nashduopolymodeltobeadrasticchangefromtheworldsofcompetitionandmonopoly.ThekeytounderstandingCournot-Nashisagraspofreactionfunctions.Stressthatreactionfunctionsarebeinggraphedonaxesthatreprese
6、ntquantities(seeFigure12.4).Oncetheyunderstandreactionfunctions,theywillbeabletofollowtheassumptions,reasoning,andresultsoftheCournot-Nash,Stackelberg,andBertrandmodels.AlthoughtheymightnotcomprehendthealgebraicderivationoftheCournot-Nashequilibrium,pointouttherepresen
7、tationsinFigure12.5ofthecompetitive,Cournot-Nash,andcollusive(monopoly)equilibria.Figure12.5givestheimpressionthattheduopolistsalwayshavesymmetricreactioncurves.Exercise(2)showsthatifthecoststructuresarenotidentical,thereactioncurvesareasymmetric.WhiletheNashequilibriu
8、m,payoffmatrices,andthePrisoners’Dilemmaareintroducedinthischapter,moreattentionisallottedtotheminChapter13.Ifyouwill
