Economics 1021A Chapter 15

Of quantity switchgearsweek switchgearsweek price and

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Unformatted text preview: 5 Quantity (thous. of Quantity switchgears/week) switchgears/week) Price and cost (thous. of $/ unit) Price and cost (thous. of $/ unit) Costs and Demand Industry 10 6 D 0 1 2 3 4 5 6 7 Quantity (thous. of Quantity switchgears/week) switchgears/week) Colluding to Make Monopoly Profits MC ATC 10 9 8 6 Economic Profit Price and cost (thous. of $/ unit) Price and cost (thous. of $/ unit) Individual Firm Industry 10 9 6 MC1 The industry Collusion achieves MC curveoutcome Mmonopoly is C the horizontal sum of the firms’ MC MC curves curves D MR 0 1 2 3 4 5 Quantity (thous. of Quantity switchgears/week) switchgears/week) 0 1 2 3 4 5 6 7 Quantity (thous. of Quantity switchgears/week) switchgears/week) Oligopoly - Collusion Oligopoly Team A $10 Team B $9 $8 $10 16, 16 13, 19 9 ,22 $9 18, 13 15, 15 12, 18 $8 20, 10 16, 12 13, 14 Oligopoly Game Payoff Matrix Oligopoly A’s strategies Cheat - $8 Collude - $10 $10 $14 Cheat - $8 B’s strategies $20 $13 $22 $16 Collude - $10 $9 $16 An Oligopoly Price-Fixing Game Game Four outcomes are possible: – Both firms comply. – Both firms cheat. – One firm...
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This document was uploaded on 04/03/2014.

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