Monopolistic competition and oligopoly

Monopolistic competition and oligopoly - PGP I Term I Entry...

Info iconThis preview shows pages 1–15. Sign up to view the full content.

View Full Document Right Arrow Icon
PGP I Term I
Background image of page 1

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

View Full DocumentRight Arrow Icon
Entry barrier: Natural or artificial Product differentiation: horizontal or vertical Nature of competition: Perfect competition: None of the above Monopoly: High entry barrier, no product differentiation Monopolistic competition: Low entry barrier, differentiated products Oligopoly: High entry barrier, products may or may not be differentiated
Background image of page 2
Characteristics approach (Lancaster) Horizontal product differentiation (Hotelling) Maximum and minimum product differentiation Vertical product differentiation: quality competition.
Background image of page 3

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

View Full DocumentRight Arrow Icon
P SR Q SR MC ATC D SR MR SR Quantity Price MC=MR Profit
Background image of page 4
P SR Q SR MC AC D SR MR SR Quantity Price P LR Q LR D LR MR LR
Background image of page 5

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

View Full DocumentRight Arrow Icon
P C Q C MC AC Quantity Price P LR Q LR D LR MR LR Excess capacity in long run
Background image of page 6
PGP I Term I
Background image of page 7

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

View Full DocumentRight Arrow Icon
Interactive decision theory: used when there is potential for conflict or cooperation. Important elements: Player, Action or moves, Strategy (pure or mixed), Outcome, Pay-off. Objective: Finding optimal strategy for each player. Assumptions: Rationality, Common knowledge Applications in Economics: Corporate strategy, trade negotiation, bargaining, auction.
Background image of page 8
Cooperative vs. non-cooperative Zero sum game vs. non-zero sum One off vs. repeated Simultaneous move vs. sequential move Continuous vs. discrete pay off Complete vs. asymmetric information Representation: Normal/strategic form game; Extensive form game
Background image of page 9

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

View Full DocumentRight Arrow Icon
Player B Player A Head Tail Head 1,-1 -1,1 Tail -1,1 1,-1
Background image of page 10
Dominant strategy Iterated dominance Nash equilibrium Sub-game perfection
Background image of page 11

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

View Full DocumentRight Arrow Icon
The strategy one player will choose no matter what the other player chooses. Airbus Boeing High price Low price High price 5, 5 3, 6 Low price 6, 3 4, 4 Low price is dominant strategy for Boeing Low price is dominant strategy for Airbus
Background image of page 12
Your friend You Take exam Don’t take exam Take exam A, F A, F Don’t take exam F, A B, B Dominant strategy for you?
Background image of page 13

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

View Full DocumentRight Arrow Icon
Robber B Robber A Confess Silent Confess 5 yrs, 5 yrs 1 yr, 7 yrs Silent 7 yrs, 1 yr 3 yrs, 3 yrs Dominant strategy equilibrium?
Background image of page 14
Image of page 15
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/01/2012 for the course STRATEGY Om121 taught by Professor Abhinavdhar during the Spring '12 term at Harvard.

Page1 / 42

Monopolistic competition and oligopoly - PGP I Term I Entry...

This preview shows document pages 1 - 15. Sign up to view the full document.

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