New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Econ 202, Week 14 Notes

by: Sydney Dingman

Econ 202, Week 14 Notes Econ202

Marketplace > Colorado State University > Economcs > Econ202 > Econ 202 Week 14 Notes
Sydney Dingman
GPA 3.7

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These are the week 14 notes over modules 34, 35, 31 and 32.
Principles of Microeconomics
Professor Christopher Blake
Class Notes
25 ?




Popular in Principles of Microeconomics

Popular in Economcs

This 4 page Class Notes was uploaded by Sydney Dingman on Thursday April 21, 2016. The Class Notes belongs to Econ202 at Colorado State University taught by Professor Christopher Blake in Winter 2016. Since its upload, it has received 25 views. For similar materials see Principles of Microeconomics in Economcs at Colorado State University.


Reviews for Econ 202, Week 14 Notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 04/21/16
Econ 202, Week 14 Notes 4/19/16, Module 34, Monopolistic Competition  Characteristics o Many Buyers o Many Sellers o Differentiated products  View of these products is what generates market power for the firm (not as much as monopoly) o Free entry and exit (low barriers to entry)  In the long run, each individual firm in a monopolistic competition will have profit equal to zero in the long run. o Graph 1  Each firm faces a downward sloping demand curve  This will create a wedge between the demand curve and MR curve  Represents demand for the products of a specific firm o Graph 2  Monopolistically competitive firm earning profit less than zero 4/19/16, Module 35, Product Differentiation and Advertising  Differences between goods and services in a market are either real or not meaningful.  3 Real Types of Product Differentiation o Style or Type  Ex. Mall food court (pizza, Chinese, burgers, sandwiches, ice cream)  Ex. Clothing, shoes o Location  Ex. Gas stations, restaurants, grocery stores o Quality  Ex. Godiva v. Hersey’s, Tools, makeup brands  What if firms are unable to create meaningful product differences? o E.g. Crest v. Colgate  not a lot of difference between toothpaste products o Firms attempt to gain market power through one of two avenues.  Branding: using certain methods to try to get brand recognition by way of logos or something recognizable.  Generating consumer loyalty through brand recognition  Generating loyalty creates a more stable demand curve for the firm itself  Ex. loyalty card.  Advertising: some sort of a program (commercial, ad, etc.) that creates demand for your product  E.g. any commercial for food/pizza changes your preferences and you end up buying the product  Pros and Cons of Monopolistic Competition o Pros:  Firms gain market power  Consumers get a variety  Incentive for firms to improve/expand variety and quality of goods and services o Cons:  Deadweight loss generated due to market power, prices are higher than in perfect competition  Might be too many products for consumers to choose from 4/21/16, Module 31, Oligopoly  Key Characteristic: o Few dominant sellers  Firms will no longer act independently from one another  Actions by one dominant seller will impact the profits of the other firms in the market o High barriers to entry 2  Firms can maintain economic profit greater than 0 in the long run under certain conditions  Duopoly: market with two dominant firms o Ex. Pepsi and Coke  In an ideal world, these firms want to act as much like a monopoly as possible o Mutually restrict the quantity produced in a market  Can charge higher prices  make more profit Options for firms: o Collusion: an agreement between firms to work together and act jointly to act like a monopoly  Illegal in the United States  Tacit Collusion: implicit agreement between firms not to compete too hard with one another o Non-cooperative behavior: firms within the market act in their own self interest, they do not try to work together to restrict quantity and raise prices  This behavior typically results in price wars  a race to the bottom or lower price to try to get higher market share; firms lower prices to get more sales 4/21/16, Module 32, Game Theory  Subset of economics that looks at interactions between economic agents o Developed by John Nash (A Beautiful Mind)  Characteristics of “Games” o Rules of the games  Dictate the allowable actions  Ex. Rock, Paper, Scissors o Strategies associated with the rules  Frequency at which each player selects a rule of the game  Ex. “Always throw rock”, Random, do what your opponent did last  Impacted by the previous moves made, they change through time depending on the action of other players 3  Information also impacts how strategies change o Pay offs  Based on the strategies and rules, what do the players gain from the interactions they just had; benefits for each player, given an interaction  We use a payoff matrix to describe they payoffs each player receives based on their selection of strategies o Profit for firms based on production decisions  Prisoner’s Dilemma o Story: two criminals are caught by the police and suspected of a major crime, but the police only have enough evidence to convict them of a minor crime. Once detained, they are separated and told that if one tells on the other and gives enough evidence to convict them, the teller will be let go and the other will get 10 years. o Relating this to a duopoly:  Firms have two options:  Cooperate with one another keep production low  Defect  firm deciding to go against the agreement ^ and produce more to get a higher market share  NOTEBOOK  For Pepsi:  If they know Coke will cooperate, the best response is to defect and make more money ($200>$180)  If they know Coke will defect, the best response is to defect ($160>$150)  Because Pepsi always wants to defect to make profit, they have a dominant strategy  Dominant strategy: regardless of the other player’s actions, one rule is always the best response to the actions of the other player o In Prisoner’s Dilemma, defect is the dominant strategy  Nash Equilibrium: outcome where in no player has an incentive to change strategy 4


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Jennifer McGill UCSF Med School

"Selling my MCAT study guides and notes has been a great source of side revenue while I'm in school. Some months I'm making over $500! Plus, it makes me happy knowing that I'm helping future med students with their MCAT."

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.