econ101w0717 - Introductory Economics Economics 101-300...

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(c) Sherrie A. Kossoudji Introductory Economics Economics 101--300 Lecture # 17 Sherrie A. Kossoudji If you print the preliminary version of these slides before class, please be aware that they are likely to change right up to class time.
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(c) Sherrie A. Kossoudji Please remember that reading these slides does not substitute for attending class. These slides are merely outline guides for what is discussed during the lecture.
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(c) Sherrie A. Kossoudji Schedule: Week 11 WEEK 11: WEEK OF MARCH 12 TH Lecture #: 16-17 Discussion #: Anderson: Chapter 13 Subjects/Concepts: Other market structures, monopoly, oligopoly Readings: This week: Next week: KW Chapter 14, KW Chapter 15 KW Chapter 15, KW Chapter 16 Homework: Graded: Ungraded: Chapter 12, problem set II; Chapter 18, problem set II Chapter 14, problem set I; Chapter 15, problem set I Section Quizzes: None Exams: None Other Important Information: None
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(c) Sherrie A. Kossoudji Sherrie’s office hours Sherrie’s office hours are changed—for this week only—to Friday between 1:30 and 3. Anyone who wants to drop the class should stop in for a signature.
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(c) Sherrie A. Kossoudji Oligopolies Oligopolies are markets with just a few firms. Some economists say that the only necessary characteristic of oligopolies is that firms are large enough to have some control over price (even if the product is homogeneous). Outcomes in oligopolistic markets are generally unpredictable, unlike in competitive, monopoly, and monopolistically competitive markets.
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(c) Sherrie A. Kossoudji What kinds of industries are oligopolistic? Industry Concentration Ratio Largest Firms Cigarettes 98.9 Philip Morris, R. J. Reynolds, Lorillard, Brown and Williamston Batteries 90.1 Duracell, Energizer, Rayovac Breweries 89.7 Anhauser-Busch, Miller, Coors, Stroh’s Light Bulbs 88.9 Westinghouse, General Electric Breakfast Cereals 82.9 Kellogg’s, General Mills, Post, Quaker Oats Automobiles 79.5 GM, Ford, DaimlerChrysler Source: Census Bureau, table taken from Krugman and Wells, Microeconomics, 1 st Edition, p365)
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Strategic behavior is characteristic of oligopolistic firms Managers of a firm know that if they have market power, so do the other firms in the industry. Their actions depend on how they think other firms will react to their action. Such behavior is often modeled as a strategic game. Strategic games have three key components: the players, the strategies available to each player, and the payoffs each player receives for each possible combination of strategies. Each firm is rational and assumes that other firms are rational, and each is trying to maximize its own payoff. A game where there is NO communication between the players is like the prisoner’s dilemma game. Colluding for joint and individual firm profit is a strategic
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This note was uploaded on 04/04/2008 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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econ101w0717 - Introductory Economics Economics 101-300...

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