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AP Economics

AP Economics. Mr. Bernstein Module 64: Introduction to Oligopoly December 13, 2013. AP Economics Mr. Bernstein. Oligopolies Few producers HHI or other measures of concentration Interdependence One firm’s actions impact the other

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AP Economics

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  1. AP Economics Mr. Bernstein Module 64: Introduction to Oligopoly December 13, 2013

  2. AP EconomicsMr. Bernstein Oligopolies • Few producers • HHI or other measures of concentration • Interdependence • One firm’s actions impact the other • Firms could collude to raise prices and collectively act as a monopoly • Trusts of the late 1800’s • But each member has an incentive to marginally cheat • OPEC is case study • Reminder – collusion is illegal in the US

  3. AP EconomicsMr. Bernstein The Duopoly Model • Joseph Bertrand (1822-1900) • If products are identical, oligopolists repeatedly lower price to undercut the competition until P=MC, as in Perfect Competition • AugustinCournot (1801-1877) • If products are identical, oligopolists choose output to maximize profit, given output of rival. Equilibrium is reached with positive economic profits, though below monopoly profits.

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