Unformatted text preview: in a vacuum and therefore can be modeled as a
“monopoly”. The main impetus for temporarily modeling an oligopolistic firm as a “monopoly” is because it provides a
“benchmark” for later chapters where we relax the assumption of “dormant rivals” and rigorously model strategic
interaction between firms.
2. Market Power
In this chapter, market “power” does not mean (as do “leftist” pseudo-intellectual pundits) that the monopolist “forces
customers to buy its product or use its service” (only North Korea’s Dear leader has that kind of power!). Rather, total
market power (“monopoly”) means that the price depends solely on one firm’s output. For example, the only way the
monopolist can sell more output is by lowering the price. It goes without saying that most companies possess some
degree of market power. Here are some factors by which firms acquire some degree of market power:
Physical/Perceptual Product differentiation (literal or perceived): From ECO 100 you know tha...
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