Oligopoly - 151 Chapter15Oligopoly KeyFeatures: Examples 152

Info iconThis preview shows pages 1–32. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 15 – Oligopoly Key Features: Examples 15-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Kinked Demand Curve Model Specifically: 15-2
Background image of page 2
Diagram 4: The Kinked Demand Curve Arti cle Article III. Q Article Article Article Article Articl Arti 15-3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Article I. Diagram 4:  The Kinked Demand Curve Articl e IX. Article XVI. Q Article Article Article Article Articl Article XIV. E 15-4
Background image of page 4
Article II. Diagram 4:  The Kinked Demand Curve Articl Article XXVII. Article Article Article Article Articl Arti cle Article Article Article XXII. 15-5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Note: Advantages of the Model Weaknesses of Model 15-6
Background image of page 6
Dominant Firm Oligopoly Most useful for industries with: o Firms that differ in size 15-7
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Diagram 5:  The Dominant Firm Oligopoly Model Arti cle Articl e 15-8
Background image of page 8
Weaknesses of Model: Game Theory 15-9
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Prisoners’ Dilemma Rules Strategies 15-10
Background image of page 10
Pay-0ffs Outcome 15-11
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Nash Equilibrium Table 1:   The Prisoners’ Dilemma Payoff Matrix $2m $4.5m $-1m $0m Comply $2m $-1m $4.5m $0m 15-12
Background image of page 12
Bonnie must decide what to do: o If Clyde confesses: o If Clyde denies: 15-13
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
(This is called a dominant strategy because it works no matter  what action the other player takes) 15-14
Background image of page 14
Table 1:   The Prisoners’ Dilemma Payoff Matrix 15-15
Background image of page 15

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Clyde has the same choice: o If Bonnie confesses: o If Bonnie denies:  15-16
Background image of page 16
Oligopoly Game o Cartel  o Firms have 2 choices: 15-17
Background image of page 17

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
To work out the pay-off matrix, we need to know the cost and  demand conditions. See Diagram 6:  Costs and Demand 15-18
Background image of page 18
Article III. Diagram 6:  Costs and Demand Article IV. 15-19
Background image of page 19

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
15-20
Background image of page 20
Both Firms Comply:  o See Diagram 7:  Colluding to Make Monopoly Profits Both Firms Cheat:  o See Diagram 8:  Both Firms Cheat Firm A(B) Cheats and Firm B(A) Complies: 15-21
Background image of page 21

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
o See Diagram 9:  One Firm Cheats 15-22
Background image of page 22
Article V. Diagram 7:  Colluding to Make Monopoly Profits  Article VI. Article VII. Article VIII. 15-23
Background image of page 23

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Article IX.  Diagram 8:  Both Firms Cheat Article X. Article XI.   15-24
Background image of page 24
Article XII.  Diagram 9:  One Firm Cheats Article XIII. 15-25
Background image of page 25

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Table 2:  Duopoly – Average Total Cost, Price, Profit and Loss Gear Trick ATC 8000 ATC 6000 Price 7500 Price 7500 Loss (ATC - Price) 500 per unit 2000 x 500 = 1.0 m Profit (Price – ATC) 1500 per unit 3000 x 1500 = 4.5m Quantity 2000 Quantity 3000 15-26
Background image of page 26
Table 3:   The Duopoly Payoff Matrix 15-27
Background image of page 27

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Firm A must decide what to do: o If Firm B complies: o If Firm B cheats: 15-28
Background image of page 28
Table 3:  The Duopoly Payoff Matrix 15-29
Background image of page 29

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Firm B has the same choice: o If Firm A complies: o If Firm A denies:  15-30
Background image of page 30
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/02/2010 for the course ECON econ101 taught by Professor Trimarchi during the Fall '09 term at Waterloo.

Page1 / 51

Oligopoly - 151 Chapter15Oligopoly KeyFeatures: Examples 152

This preview shows document pages 1 - 32. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online