Monopoly & Monopolistic Competition Concepts

The demand curve for a monopolist is the same as the market demand curve. It is downward sloping and inelastic, meaning changes in price have a small impact on quantity demanded.

The demand curve for a monopolistic competitor is flatter than a monopolist's, due to the existence of substitutes. It is elastic, meaning changes in price have a significant impact on quantity demanded.

Oligopolies are characterized by mutual interdependence, meaning each firm's actions affect and are affected by the actions of its competitors.

When an oligopolist raises its price, it may lose a significant number of customers to its competitors, leading to a drop in quantity demanded. This makes the demand curve elastic in this scenario.

When an oligopolist lowers its price, it may attract customers from its competitors, but the competitors may also lower their prices to match. This leads to a smaller change in quantity demanded, making the demand curve inelastic in this scenario.

The demand curve for an oligopolist is kinked due to the interplay of elastic and inelastic portions. The kink occurs where the oligopolist fears losing market share if it raises prices but gains only a small increase in quantity demanded if it lowers prices.

Oligopolies can cooperate to avoid competition, which can lead to higher prices and reduced consumer welfare. Examples include cartels, where firms agree on prices or output levels.

Oligopolies can compete aggressively to gain market share, which can lead to lower prices and increased consumer welfare. Examples include price wars, where firms undercut each other's prices.

When companies secretly coordinate their bids, ensuring one company wins while others receive predetermined projects.

A company lowers its prices below the cost of production to drive competitors out of the market, usually illegal in oligopolistic markets.

Companies use their dominance in one market to influence a separate market.

Two or more companies merge, impacting competition in different ways.

A merger between companies in the same industry, offering similar products or services, creating a monopoly or oligopoly.

A type of oligopoly where firms copy each other's pricing strategies. One firm acts as a leader, setting the price, and others follow suit. This mimics the appearance of a leader, but is considered illegal as it manipulates the market.

An illegal agreement between firms to fix prices at a certain level. This involves open communication and coordination, resulting in artificially high prices for consumers.

A group of firms that controls the supply of a commodity to maintain high prices. They restrict production to create artificial scarcity and maximize profits.

The point where the marginal revenue curve for an oligopolist changes direction. It forms due to the kinked demand curve model, where price changes are expected to be followed by competitors.

The principle that a firm's marginal revenue curve is divided into two linear parts. These parts are located below the kinked demand curve, reflecting the different price sensitivities.

Similar to other market structures, oligopolists maximize profits by setting production where marginal revenue equals marginal cost. However, the kinked demand curve determines their pricing strategy.

A field of study that analyzes strategic decision-making in situations where players' outcomes depend on each other's choices. It provides insights into the behavior of interdependent players, like oligopolists.

A scenario where two individuals acting in their own self-interest, even if it would be mutually beneficial to cooperate, end up with a worse outcome. This applies to oligopolies where competition might lead to lower prices.

The best outcome in a prisoner's dilemma, where both parties choose not to confess, resulting in minimal penalties. However, it's difficult to achieve due to self-interest and lack of trust.

This is where one party confesses and the other stays silent. This allows the confessing party to avoid imprisonment, but the silent party receives the most severe sentence.

A situation where a group of companies collude to control prices, reduce competition, and increase profits. This can harm consumers by raising prices.

The act of secretly agreeing with competitors to set prices, restrict output, or divide markets. It is illegal under antitrust laws in many countries.

Laws aimed at preventing monopolies and promoting fair competition in the marketplace. These laws aim to ensure a level playing field for businesses and protect consumers from unfair market practices.

The burden of proof required in a civil case, where the plaintiff must show that it is more likely than not that the defendant caused the damages.

A legal proceeding where a party seeks to recover damages for a wrongful act committed by another party. The plaintiff must prove that the defendant caused harm.

A legal proceeding where the government prosecutes an individual or entity for a crime. The prosecution must prove guilt beyond a reasonable doubt.

The standard of proof in criminal cases, where the prosecution must prove guilt beyond a reasonable doubt. The defendant is presumed innocent until proven guilty.

A situation where an individual or company holds exclusive control or dominance over a market, potentially leading to higher prices, reduced innovation, and unfair competition.

A situation where there are only a few large companies dominating a market, which can lead to limited competition and potentially higher prices.