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Unformatted text preview: ECON 300B Lei Intermediate Microeconomics Winter 2011 1 Chapter 13 Chapter 13 Chapter 13 Chapter 13 Oligopoly and Monopolistic Competition Oligopoly and Monopolistic Competition Oligopoly and Monopolistic Competition Oligopoly and Monopolistic Competition Table 13.1 Revisit Oligopoly Oligopoly Oligopoly Oligopoly ~ a market with only a small number of firms because of substantial barriers of entry Duopoly Duopoly Duopoly Duopoly ~ a special case of oligopoly, where there are only two firms With only a few firms in the market, each oligopolist has market power. Each firm has to take the other firm(s)s action in to account. Oligopolists can either act independently or cooperate/coordinate/collude. Hence, there are two types of oligopoly: i. Cooperative oligopoly ii. Noncooperative oligopoly i. Cooperative oligopoly i. Cooperative oligopoly i. Cooperative oligopoly i. Cooperative oligopoly Cartel Cartel Cartel Cartel ~ a group of firms that explicitly agree to coordinate their activities By forming a cartel, oligopolists collectively behave like a monopolist. Suppose there are n oligopolists. If the cartel members agree to share production and profit equally, each oligopolist will sell ______________________________________________________ at _________________________________ and earn ________________________________. ECON 300B Lei Intermediate Microeconomics Winter 2011 2 Coordination between oligopolists, implicit or explicit, is typically forbidden by _________________________________________________within a country, but there are legal cartels that operate across countries such as the Organization of Petroleum Exporting Countries (OPEC) 1 . Since each cartel member has incentive to cheat (charges a price lower than g G to take over the market or produces more than G / to earn higher revenue), a cartel can be formed only if it is able to detect cheating and punish violators according to the agreement. The extreme form of cooperation is ____________________________________________- the buying, selling and combining of different companies. Antitrust laws restrict the ability of firms to merge if the effect would be anticompetitive....
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