Perloff_397614_IM_Ch13

# Perloff_397614_IM_Ch13 - Chapter 13 Oligopoly and...

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Chapter 13 Oligopoly and Monopolistic Competition ± Chapter Outline 13.1 Market Structures 13.2 Cartels Why Cartels Succeed or Fail Maintaining Cartels Mergers 13.3 Noncooperative Oligopoly 13.4 Cournot Oligopoly Model Cournot Model of an Airline Market The Cournot Equilibrium with Two or More Firms The Cournot Model with Nonidentical Firms 13.5 Stackelberg Oligopoly Model Calculus Solution: Airlines Example Graphical Solution: Airlines Example Why Moving Sequentially Is Essential Strategic Trade Policy: An Application of the Stacklberg Model 13.6 Comparison of Collusive, Cournot, Stackelberg, and Competitive Equilibria 13.7 Bertrand Oligopoly Model Bertrand Equilibrium with Identical Products Nash-Bertrand Equilibrium with Differentiated Products 13.8 Monopolistic Competition Monopolistically Competitive Equilibrium Fixed Costs and the Number of Firms ± Teaching Tips Chapter 13 begins with a general description of market structures that lie between perfect competition and monopoly in the competitive spectrum. Table 13.1 in the text provides a good summary of eight characteristics of various market structures, plus an example of each. It would be well worth the time to begin this section by discussing this table with the class and asking the students to come up with additional examples of each market structure.

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178 Perloff • Microeconomics: Theory and Applications with Calculus There are a number of models presented in this chapter and the next, and you may not have time to cover all of them. If they are presented too quickly in succession, students are more likely to get confused between the models and their outcomes. You might consider introducing game theory as the primary method of analysis, and discuss other approaches (e.g., the graphical approach to the Cournot and Stackelberg models) in the context of game theory. When presenting game theory, consider dividing the class into small groups before making any formal presentation of types of equilibria and strategic rules. Give each group three or four games to solve, including a simple zero-sum game, a dominant strategy equilibrium where players follow a given strategy no matter what the other does, and a Nash equilibrium where the payoffs create a prisoners’ dilemma. (The Additional Questions and Problems section in this chapter includes sample payoff matrices.) You can ask the groups to simply play the games at first, under the following rules. First, assume that each player must move simultaneously, and that no cooperation is allowed. Second, allow collusion between players, and finally, assume that one player gets to move first. Finally, you could ask the groups to try to write down general decision-making rules for players, and note if they need to modify those rules when the game is played repeatedly. If you try this, you may find that students are quite good at identifying strategic decision-making rules once they understand the games. By asking students to play the games first, you can then go back through the various outcomes and identify them as Cournot, cartel, and so on. One of the great advantages of game
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## This note was uploaded on 11/03/2009 for the course ARE 100A taught by Professor Constantine during the Spring '08 term at UC Davis.

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Perloff_397614_IM_Ch13 - Chapter 13 Oligopoly and...

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