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Unformatted text preview: 2010-04-071Perfectly Competitive MarketsEquilibrium in Competitive Markets (ch. 11)Characteristics of Perfect Competition•Sellers are price takers–Too small to affect price by changing outpu–Too small to affect price by changing output•Sellers do not behave strategically–A seller’s actions cannot affect actions of others•Entry into market is free• Buyers are price takersContrast with a Market that is not Perfectly Competitive: Cola Market•Some freedom to determine price (sell more at lower price, less at higher price)•Strategic interactionCoke/Pepsi•Buyers are price takers• Limited entry (secret formulas)What Characteristics Typify A Competitive Market? •Size and number of suppliers–Coke/Pepsi vs. wheat, hogs, etc.•Substitutability of different sellers’ products–Differentiated goods vs. homogenous goods (taste differences vs uniformitydifferences vs. uniformity)•Free entry–Patents, trademarks, know-how can limit entry•Extent to which buyers are informed about price...
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- Fall '10