Chapter 13 Monopolistic Competition and Oligopoly. Monopolistic competition. Output and price determination in SR and LR. Role of advertising Oligopoly Definition. Price and output determination – game theory Cartels Anti-trust laws and regulation of markets.
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Market Share in Monopolistic Competition
MR = MC
Given the short run equilibrium described, why does entry occur?
As entry occurs, demand shifts leftward until profit equals zero.
The distinguishing features of oligopoly are:
Red=4 largest; green=next 4; blue =next 12
Golden Balls (compliments of youtube)
The Prisoners’ Dilemma
What’s the “cooperative” equilibrium?
prices fell and volume increased.
consumer surplus increased $11.8 billion
producer surplus increased $4.9 billion.
rapid change in structure of airline industry (hubs, excess capacity reduced, pricing changes, etc.)
consumer surplus increased $15.4 billion
producer surplus decreased $4.8 billion.
truck driver’s wages fell.Anti-trust policy
The Standard Oil Story:
1890: Sherman Act