ECON%201101%20Week%209%20PN%201

ECON%201101%20Week%209%20PN%201 - ECON 1101 Week 9 Lecture...

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1 ECON 1101 – Week 9 Lecture 1 Thinking Strategically Frank, Jennings, and Bernanke: Ch 11
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2 Outline Theory of games The prisoner’s dilemma game Games in which timing matters Strategic role of preferences
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3 Oligopoly Oligopoly is a market structure in which: Natural or legal barriers prevent the entry of new firms A small number of firms compete
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4 What is Oligopoly? Small Number of Firms Oligopoly consists of a small number of firms each of which has a large share of the market. Such firms are interdependent and they face a temptation to cooperate to increase their joint profit. Examples of Oligopoly Identify oligopoly by looking at the concentration ratios. A four-firm concentration ratio where share of total revenue exceeds 60 percent indicates oligopoly.
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5 Two Traditional Oligopoly Models Dominant Firm Oligopoly In a dominant firm oligopoly , there is one large firm—the dominant firm—that has a significant cost advantage over many other, smaller competing firms. The dominant firm sets the market price and the other firms are price takers Examples: large petrol retailer, a big video rental store in a local market
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ECON%201101%20Week%209%20PN%201 - ECON 1101 Week 9 Lecture...

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