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


by: Kerrigan Unter

Oligopoly ECON 1011

Kerrigan Unter
GPA 3.0
Foster, I

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

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

Foster, I
Class Notes
25 ?





Popular in Economcs

This 3 page Class Notes was uploaded by Kerrigan Unter on Monday October 19, 2015. The Class Notes belongs to ECON 1011 at George Washington University taught by Foster, I in Summer 2015. Since its upload, it has received 15 views. For similar materials see INTRODUCTION TO MICROECONOMICS in Economcs at George Washington University.


Reviews for Oligopoly


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: 10/19/15
ECON 1011 Chapter 11 Oligopoly o Imperfect condition market structure with more than one rm in an industry in which at least one rm is a price setter 0 There are two broad categories of imperfectly competitive markets many rms compete each offering a slightly different product the industry is dominated by a few rms Monopolistic Competition Competition among many 0 The model of monopolistic competition assumes a large number of rms 0 it assumes that the goods and services produced by rms are differentiated This differentiation may occur by virtue of advertising convenience of location product quality reputation of the seller or other factors 0 Monopolistic competition model characterized by many rms producing similar but differentiated products in a market with easy entry and exit 1 Pro t Maximization 0 Because products in a monopolistically competitive industry are differentiated rms face downwardsloping demand curves 12 Excess Capacity The Price of Variety o The longrun equilibrium solution in monopolistic competition always produces zero economic pro t at a point to the left of the minimum of the average total cost curve That is because the zero pro t solution occurs at the point where the downwardsloping demand curve is tangent to the average total cost curve and thus the average total cost curve is itself downwardsloping 0 Excess capacity situation in which a rm operates to the left of the lowest point on its average total cost curve 0 Because monopolistically competitive rms charge prices that exceed marginal cost monopolistic competition is inefficient Oligopoly Competition among the few 0 Oligopoly situation in which a market is dominated by a few rms each of which recognizes that its own actions will produce a response from its rivals and that those responses will affect it 21 Measuring Concentration in Oligopoly Concentration ratio percentage of output accounted for by the largest rms in an industry Her ndahl Hirschman Index alternative measure of concentration found by squaring the percentage share stated as a whole number of each rm in an industry then summing these squared market shares 22 The Collusion Model There is no single model of pro tmaximizing oligopoly behavior that corresponds to economists models of perfect competition monopoly and monopolistic competition Duopoly industry that has only two rms Overt collusion when rms openly agree on price output and other decisions aimed at achieving monopoly pro ts Cartel firms that coordinate their activities through overt collusion and by forming collusive coordinating mechanisms Firms form a cartel to gain monopoly power Tacit collusion unwritten unspoken understanding through which rms agree to limit their competition 23 Game Theory and Oligopoly Behavior Strategic choice choice based on the recognition that the actions of others will affect the outcome of the choice and that takes these possible actions into account Game theory analytical approach through which strategic choices can be assessed Payoff outcome of a strategic decision change in economic pro t to each rm Dominant strategy when a player s best strategy is the same regardless of the action of the other player Dominant strategy equilibrium game in which there is a dominant strategy for each player a rm raises its price another rm introduces a new product the rst rm cuts its price a third rm introduces a new marketing strategy and so on Titfortat strategy situation in which a rm responds to cheating by cheating and responds to cooperative behavior by cooperating Trigger strategy situation in which a rm makes clear that it is willing and able to respond to cheating by permanently revoking an agreement Extensions of imperfect competition advertising and price discrimination 3 Advertising Firms in monopoly monopolistic competition and oligopoly use advertising when they expect it to in crease their pro ts Imperfect competition can lead to a price greater than marginal cost and thus generate an inefficient allocation of resources 32 Price Discrimination Price discrimination situation in which a rm charges different prices for the same good or service to different consumers even though there is no difference in the cost to the rm of supplying these consumers Monopoly power is one of three conditions that must be met A PriceSetting Firm The rm must have some degree of monopoly power it must be a price setter A pricetaking rm can only take the market price as given it is not in a position to make price choices of any kind Thus rms in perfectly competitive markets will not engage in price discrimination Firms in monopoly monopolistically competitive or oligopolistic markets may engage in price discrimination Distinguishable Customers The market must be capable of being fairly easily segmented separated so that customers with different elasticities of demand can be identi ed and treated differently Prevention of Resale The various market segments must be isolated in some way from one another to prevent customers who are offered a lower price from selling to customers who are charged a higher price If consumers can easily resell a product then discrimination is unlikely to be successful Resale may be particularly difficult for certain services such as dental checkups In general pricediscrimination strategies are based on differences in price elasticity of demand among groups of customers and the differences in marginal revenue that result A rm will seek a price structure that offers customers with more elastic demand a lower price and offers customers with relatively less elastic demand a higher price


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

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Janice Dongeun University of Washington

"I used the money I made selling my notes & study guides to pay for spring break in Olympia, Washington...which was Sweet!"

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!"

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

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.