rohlf_lecture10 - Chapter 8 Monopolistic Competition and...

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Chapter 8 Monopolistic Competition and Oligopoly
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2 EXHIBIT 8.1 Industry Structure: A Preview
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3 Monopolistic Competition Remember that in monopolistic competition firms make a similar but differentiated product This means that they face a downward sloping demand curve Higher prices do not drive away all customers And there are many firms competing against each other
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4 Monopolistic competition Firms again equate MR and MC to maximize profits
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5 One firm in monopolistic competition in the short-run
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6 Monopolistic competition However, in the long-run, above normal profits (economic profits) induces entry as in perfect competition This reduces the demand of any individual firm until normal profits (zero economic profits) are made by all firms
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7 The Long-Run Adjustment Process in Monopolistic Competition
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8 Oligopolies Characterized by a few firms Strategic interaction important Equilibrium concept is called “Nash equilibrium”
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9 Nash equilibrium Suppose 2 players
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rohlf_lecture10 - Chapter 8 Monopolistic Competition and...

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