142_4 - Market structure 3 dominant firm a competitive...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Villas-Boas-Lecture 4 Page 1 Market structure 3: dominant firm & a competitive fringe of N firms. – “Fringe” firms act as price takers. – Dominant firm - why is it dominant? – Can the dominant firm exercise market power forever?
Background image of page 1

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

View Full Document Right Arrow Icon
Villas-Boas-Lecture 4 Page 2 Market structure 3: dominant firm & a competitive fringe of N firms. – Would dominant firm want to produce at the monopoly output? – Dominant firm: Since I cannot stop the fringe firms, let them sell as much as they want at the price I set . – Except at the very high prices I have some demand left after the fringe produces. – I face a residual demand curve , i.e., I have market power. I am a monopolist on the residual demand!
Background image of page 2
Page 3 Market structure 3: dominant firm & a competitive fringe pricing strategies: – Dominant firm maximizes profits on the residual demand curve. • Once we get residual demand we are in the monopolist case. – Fringe firms produce until MC=P, where P is set by the
Background image of page 3

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

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 16

142_4 - Market structure 3 dominant firm a competitive...

This preview shows document pages 1 - 4. Sign up to view the full document.

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