Nov 9 and 11 Imperfect Competition Models

Differentiated or differentiated easy relatively

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             Differentiated              or                                                                       Differentiated       Easy Relatively Difficult       Blocked                                                                  Easy       or Closed      Perfect     A Lot Limited     None, Unless         Regulated               No           Yes, But Ltd by  Yes            Yes        Price Taker       #  of Substitutes Price Maker       Price Maker
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    Perfect vs Imperfect Competition Models AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles MC d P D MR Q d MC Monopolistic Competition MC P D MR Q 1 MC Monopoly d=MR s = MC P = MR=MC Q 1 Perfect Competition
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    Monopolistic Competition Model AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles Price Quantity MC d P D MR Q d Q T As with other imperfect  competition models, produce  where MR = MC, with price  being determined along the  demand curve But note that demand is more  elastic … more close  substitutes, not much  incentive to compete on price  … Why?  Consequently they  compete more on product  differentiation and product  promotion/better services MC
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    Monopolistic Competition – characteristics  of both perfect competition and monopoly Many sellers dealing with slightly differentiated products  (physical/perceived differences, and/or varying services) Extensive knowledge Ease of Entry/Exit Limited market power Demand curve very elastic, but a price maker Emphasis on non-price competition and services Attempt to develop customer loyalty, but must be aware of  actions of close competitors Examples include restaurants, convenience stores, clothing  stores, gas stations, pizza delivery firms
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    Comparisons of Industry Market  Structures Characteristics Perfect  Competition Monopolistic  Competition Oligopoly Oligopsony Monopoly Monopsony Number of Buyers/Sellers (very large number, many,  few, one) Product Differentiation (Homogeneous, Slightly  Differentiated, Unique) Ease of Entry/Exit (Easy, Relatively Easy  Difficult, Difficult, Closed) Degree of Info Available to  Competitors (Perfect, A lot, Limited,  None) Influence on Price  (yes or no)   Very large # Many Few          One Homogenous         Slightly           Homogeneous       Unique                                                                               Differentiated              or                             
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