1 / 22

Monopolistic Competition & Oligopoly Principles of Microeconomics Boris Nikolaev

Monopolistic Competition & Oligopoly Principles of Microeconomics Boris Nikolaev. Monopolistic Competition. This model was developed independently in the 1930’s by Edward Chamberlin and Joan Robinson . Many sellers Each seller has a small market share

gaura
Download Presentation

Monopolistic Competition & Oligopoly Principles of Microeconomics Boris Nikolaev

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Monopolistic Competition & OligopolyPrinciples of MicroeconomicsBoris Nikolaev

  2. Monopolistic Competition • This model was developed independently in the 1930’s by Edward Chamberlin and Joan Robinson. • Many sellers • Each seller has a small market share • Product differentiation  some market power  some control over price • Free or almost free entry • Non-price competition (advertising)

  3. Examples • Banks (?) • Sporting Goods • Radio Stations (?) • Fish and Seafood • Clothing • Jewelry • Computers • Fast Foods [mac ad] • Apparel Stores • Canned Goods • Convenience Stores

  4. Short-Run (profit)

  5. Short-run (loss) Notice that as before when ATC > p the firm is making a loss.

  6. Long Run

  7. Efficiency • Robinson vs Chamberlin • Are chain stores good?

  8. Product Differentiation The firm controls (1) price (2) product quality (3) advertisement. • Quality [advertisement vs reality] [Mc Donald’s reply] 2. Location / hours of availability 3. Brand names and packaging [Nike] [reebok][reebok 2][Asics]

  9. Non-Price Competition • Advertising creates intangible (perceived) value. [watch here] [ads]

  10. Brand Names Top 10 Brands [see here] mentioned on Twitter [see here] What top brands spend on advertisement • Microsoft – more than 20 percent of their annual revenue or $11.5 billion • Coca-Cola – more than $2.5 billion • Yahoo – more than 20 percent of their annual revenue or $1.3 billion • eBay – 14 percent to 15 percent of its revenue – which was $871 million, much of that to advertise on Google • Google – In the millions rather than billions of dollars – with $188 million • Starbucks – $95 million Big PharmaSpends More On Advertising Than Research And Development, Study Finds [source]

  11. Is advertising good or bad? • Galbraith vs Hayek

  12. Oligopoly Characteristics (e.g. TV – Comcast, Viacom, Time Warner, Disney, Fox) • A few large sellers (in the case of two  duopoly) • Homogeneous (e.g. bananas) or differentiated product (e.g. coffee) • Market power • Mutual interdependence • Barriers to entry

  13. Examples • Airlines • Auto Industry • Steel/ Cement • Tobacco • Soft Drinks • Beer • Movie • TV (Media) • Book Publishing • Coffee/ Bananas • Cell Phones • Air Defense • Banking • Cereal • Oil

  14. Duopoly

  15. The Prisoner’s dilemma

  16. Cartels Examples • OPEC • DeBeers • Caviar • NCAA • [milk] • [gas] Problems

  17. Pseudo-variety • Technique oligopolies use to capture bigger share of the market. The way it works: flood the shelves with similar (quality) products but trivially differentiated. • It gives the illusion of variety; yet, it makes real competition harder as new companies now compete with more products as theirs is less noticeable on the shelf. [Bud Ad] [ Bud Ad 2]

  18. Is small beautiful… • Or is bigger better?

More Related