101 lecture 17 oligopoly

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Quiz 8 Name_____________ ID ________

1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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Quiz 8 Name_____________ ID ________

1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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Quiz 8 Name_____________ ID ________

1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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Quiz 8 Name_____________ ID ________

1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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Quiz 8 Name_____________ ID ________

1. What Q will maximize profits?2. What is total revenue?3. What is profit?

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Profit

Perfect Competition

Perfect Competition$

Quantity

P

Perfect Competition$

Quantity

Demand=MR

P

Perfect Competition$

Quantity

Demand=MR

1. MR=MC?

P

Perfect Competition

Marginal CostMC

$

Quantity

Demand=MR

1. MR=MC?

P

Perfect Competition

Marginal CostMC

$

Quantity

Demand=MR

1. MR=MC?

Q

P

Perfect Competition

Marginal CostMC

$

Quantity

Demand=MR

1. MR=MC?

Q

P

Perfect Competition

Marginal CostMC

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q

Q

P

Perfect Competition

Marginal CostMC

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q

Total Revenue

Q

P

Perfect Competition

Marginal CostMC

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Total Revenue

Q

P

Perfect Competition

Marginal CostMC Average Cost

ATC

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Total Revenue

Q

P

Perfect Competition

Marginal CostMC Average Cost

ATC

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Total Revenue

Q

P

Perfect Competition

Marginal CostMC Average Cost

ATC

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Total Revenue

Q

P

Perfect Competition

Marginal CostMC Average Cost

ATC

Total Cost

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Q

P

Perfect Competition

Marginal CostMC Average Cost

ATC

Total Cost

$

Quantity

Demand=MR

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Q

P

Perfect Competition

Marginal CostMC Average Cost

ATC

Total Cost

$

Quantity

ProfitDemand=MR

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Monopoly$

Q

Monopoly$

Q

Demand

Marginal Revenue MR

Monopoly$

Q

Demand

Marginal CostMC

Marginal Revenue MR

Monopoly$

Q

Demand

Marginal CostMC

Marginal Revenue MR

Monopoly$

Q

Demand

1. MR=MC?

Marginal CostMC

Marginal Revenue MR

Monopoly$

Q

Demand

1. MR=MC?

Marginal CostMC

Q

Marginal Revenue MR

Monopoly$

Q

Demand

1. MR=MC?

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly$

Q

Demand

1. MR=MC?

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly$

Q

Demand

1. MR=MC?2. TR= P x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

$

Q

Demand

1. MR=MC?2. TR= P x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

$

Q

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

$

Q

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

$

Q

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

$

Q

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Profit

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Profit

Demand

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Profit

Demand

Consumer Surplus

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Profit

Demand

Consumer Surplus

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Marginal CostMC

Q

P

Marginal Revenue MR

Monopoly

Average CostATC

Cost

$

Q

Profit

Demand

Deadweight Loss

Consumer Surplus

1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q

Q

$Short Run

DMR

Monopolistic Competition

Q

$Short Run

DMR

MC

Monopolistic Competition

Q

$Short Run

DMR

MC

Monopolistic Competition

Q

$Short Run

DMR

MC

QS

Monopolistic Competition

Q

$Short Run

DMR

MC

QS

Monopolistic Competition

Q

$Short Run

DMR

MC

QS

PS

Monopolistic Competition

Q

$Short Run

DMR

MC

ATC

QS

PS

Monopolistic Competition

Q

$Short Run

DMR

MC

ATC

QS

PS

Monopolistic Competition

Q

$Short Run

DMR

MC

ATC

QS

PS

Monopolistic Competition

Q

$Short Run

DMR

MC

ATC

QS

PS

Monopolistic Competition

Q

$Short Run

DMR

MC

ATCProfit

QS

PS

Monopolistic Competition

Q

$Short Run

DMR

MC

ATCProfit

High PriceLarge Quantity

QS

PS

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATCProfit

High PriceLarge Quantity

QS

PS

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

QS

PSDemand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

QS

PSDemand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

QS

PSDemand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

QSQ

PSDemand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

QSQ

PSDemand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

QSQ

PPSDemand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

Lower PriceLower Quantity

QSQ

PPSDemand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

Lower PriceLower Quantity

QSQ

P

PS

L

L

Demand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

Lower PriceLower Quantity

QSQ

P

PS

L

L

Demand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

Lower PriceLower Quantity

QSQ

P

PS

L

L

Demand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

Lower PriceLower Quantity

QSQ

P

PS

L

L

Demand Flattens

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

High PriceLarge Quantity

Lower PriceLower Quantity

QSQ

P

PS

L

L

Demand Flattens

Profit

Monopolistic Competition

Q

$Short Run

Long Run

DMR

MC

ATC

Profits disappearin the long run

due to competition

High PriceLarge Quantity

Lower PriceLower Quantity

QSQ

P

PS

L

L

Demand Flattens

Profit

Monopolistic Competition

Q

$

Monopolistic Competition

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Long Run Demand

Long Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Long Run Demand

Long Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Long Run Demand

Long Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Long Run Demand

Long Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

Q

$

Monopolistic Competition

Short Run Demand

Short Run Marginal Revenue

Long Run Demand

Long Run Marginal Revenue

Marginal Costs

AverageTotal Costs

QSR

PSR

QLR

PLR

Microeconomics

Oligopoly

Few to Sell

PerfectCompetition

MonopolyMonopolisticCompetition

Oligopoly

Number of Firms

Many One Many Few

Type of Product

Identical Unique Brands Similar

Ease of Entry Easy Blocked Easy Hard

Demand D = MR D > MR Dynamic Game Theory

ExamplesCommodities

RiceApples

UtilitiesGovernment

BrandsCokeApple

STC-MobilyHyperPanda

Danube

Pairs

Collusion Dominant Strategy Nash Equilibrium Cooperative Equilibrium Non-cooperative Equilibrium

Key Terms

Oligopoly

Oligopoly

Small number of interdependent firms

compete

Oligopoly

Oligopoly

Cannot use usual methods

Demand curves not obviousComplex Strategy

Oligopoly

Oligopoly

Don’t know Demand Curve

Don’t know Marginal Revenue curve

Don’t know where to find profit maximization point

Eddie

Willie

Betrays

Willie1 Year

Silent

Silent

Betrays

Eddie1 Year

EddieGoes Free

Willie10 Years

WillieGoes Free

Eddie10 Years

Willie5 Years

Eddie5 Years

Prisoner's

Dilemma

Prisoner's Dilemma

Prisoner's Dilemma

Pursuing the Dominant Strategy Results in Non-Cooperation

and Leaves Everyone Worse Off

Game Theory

Game Theory

RulesStrategies

Payoffs

John Nash(1928 - )

Game TheoryNash Equilibrium

Nobel 1994

A Beautiful Mind

Duoploy

Duoploy

Two Sellers

Profits Attract

Competition

Five Competitive Forces

Five Competitive Forces

Existing Firms Potential Firms

Substitutes Buyers

Suppliers

100

150Mobily1,000

150

STC1,000

100

Mobily500

Mobily2,000

Mobily700

STC2,000

STC500

STC700