L27X oligopoly2 jpw - microL27-F09-

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Unformatted text preview: microL27-F09- http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Oligopoly & Game Theory Lecture 27 Jennifer P. Wissink 2009 John M. Abowd and Jennifer P. Wissink, all rights reserved. December 3, 2009 microL27-F09- http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Announcements for Fall 2009 MAKE SURE YOU ARE CHECKING MyEconLab site for all quiz information Blackboard site for all other information about office hours, review sessions, etc NOTE: the final exam info memo has been posted. CLASS and SECTION EVALS Please, please, please: read the email you received requesting econ department evaluations. Please click on the link provided and complete an evaluation for this and any of the other courses listed there for you. It doesn't take long. I know this is old hat now and the novelty has worn off, but it really helps the most if we get input from the entire class. Your feedback is very helpful to me and to the TAs! Really!! I'd be very grateful if you'll take a few minutes to let me know what you think. Your identify remains protected in the on-line system and the results are delivered to me after grades have been turned in. microL27-F09- http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Collusion With A Duopoly- mimic a multi-plant monopoly microL27-F09- http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Chamberlinian Collusion With A Duopoly- mimic a multi-plant monopoly With only a couple/few identical firms, and homogeneous output, this might be expected. However, when firms have different cost structures Cournot-Nash Joint Profit Cournot-Nash Joint Profit Collusive Monopoly Joint Profit Collusive Monopoly Joint Profit microL27-F09- http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Collusion Problems Frequently, side payments are essential to the cooperative solution. Especially when the cartel members have different cost structures. OPEC example: Iran and Saudi Arabia. FACT: Irans marginal costs increase more quickly than do Saudi Arabias. Suppose they do not cooperate and end up at the Cournot-Nash solution: Get profits such that: SA + I = joint Suppose they cooperate and implement the monopoly solution: Get profits such that: SA + I = joint Since Iran has the crummy marginal cost curve, it will be told not to produce very much in the collusive arrangement. Could be that: joint > joint and also that SA > SA BUT I > I ! If joint cartel profit is larger than the joint non-cooperative profit, then there is enough to make side payments to Iran to get Irans cooperation....
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This note was uploaded on 02/01/2012 for the course ECON 1102 taught by Professor Wissink during the Fall '09 term at Cornell University (Engineering School).

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L27X oligopoly2 jpw - microL27-F09-

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