Final Review of Oligopoly Markets PDF

Final Review Oligopoly market structure with only a few firms respond to other firms decisions interdependent with one another can be collusive or non collusive cartel or not no set model...

Final Review Oligopoly market structure with only a few firms respond to other firms decisions interdependent with one another can be collusive or non collusive cartel or not no set model of oligopoly 1 Cartel Model setsmonopolyprice 2 Contestable market model best strategy because a market with no BTE sets a competitive price they can increase profits model of oligopoly where Problems firms interest differ BTE determines a firms outside comp limits firms price and output ability to form a cartel even if platformmonopoliestend to only 1 firm it be natural monopolies can be competitive is open entry mplicit collusion two firms make the same pricing decision without Oligopoly price will be between coordinating the competitive price and the sticky prices prices don't change monopolistic price because of a kinked demand curve North American Industry Classification There is a system NAICS an Marginalcost in the gap industry classification that categorizesindustr marginal i higherin theGAP revenue curve bytype of economic activity andgrow in a kinked firms with like productionprocesses iYfgy.IEEe demand curve a firm can be categorized a if a firm raises its to one of 20 broad sectors price others won't from there into sub sectors go to define its competiveness but it will along if price decreases Empirical Measures of Industry structure y firm terfindahl index an index of Concentration Ratio market concentration calculated by the value of sales the squared value of the adding individual market shares of all the by thetop four firms in an firms in theindustry industry stated as a percentage of total to define how competitive an industry sales 10F F Fy Fy industryis less than 1000 considered if concentration ratio is competitive revenue high so is Herfin dahl index marketshare firm revenueindustry marketshare percentagesquared MS s S sit sit Sj Anti Trust Policy government policytowards the competitive process Judgementby Performance Judgement by structure s Judge competitiveness behavior of firms by in that Judge competitiveness by structure market RobberBarons organizations of Aluminum company found trusts who engaged in the exploitation guilty of violating antitrust in 1945 bc of the structure infariiginoimiispi.fi Fhehting of the market competition Sherman Antitrust Act of 1890 Practical law designed to regulatethe competitive process 3 causes for the decline in antitrust to violate antitrust laws a firm must use its violations and enforcement monopoly power to its benefit 1 antitrust laws are known andprevent unfair businesspractice StandardOil case did not violate monopoly from occuring Sherman act it was a structural 2 Globalization has changed american Monopoly not a performingmonopoly idealogy in terms of competition BecameClayton Antitrust Act 3 the rate of technologicalchangehasincrease dentified practicesasillegal Antitrust laws are outdated focustoo much on consumer price Reality firms are to trying exploit consumer data and limit competition Ex Google some suggest regulating bigplatforms like public utilities Proposals to remedy 1 preventdata collection competition is for losers 2 platform accountability PeterThiels Book Zero to one all failed companies couldn't 3 content over sight escape competition 4 fair oversight limiting platforms competition is a process to favor themselves Real World Firm successfulbusiness operates at a lower cost than competitors short run profits aren't thefocus maynot take full advantage of a monopolistic situation ompatible contract incentives of each of the twoparties to the contract are made to correspond as closely as possible inventive compatible self interested managers only interested in maximizing firms profit if its required X inefficiency firms offering for lessefficiently than they could firm goals include profit cost sales Lazy Monopolist firms that aren't efficient enjoy thepositiontheyrein corporatetakeover in which another firm or group issues an offer to buy up the company to gain control nonprofits have lazytendencies inefficient ATC competitive pressures the pressure of takeover can make ffint ate a firm more efficient ight Between competitive and Monopolistic Fories self interested individuals don't like competition so they share back  hey myriad laws regulations and programs thatprevent agriculture markets from working competitively government considers more than efficiency prevents competition if negative social impacts Firms will break down a monopolythrough political or economic means lobbying loophole inpatent betterproduct Initial presence in a market can be more effective than a patent reverse engineering process of firm disassembling a productand a replicating it to be better within the limits of the law Natural Monopolies Google Amazon new technology challenges naturalmonopolies occur whenthere virtual marketplaces increases competition are large fixed costs and and allowexploitation lowmarginal costs Regulation regulatoryboards determine a fair price whichincludes all costs plus a normal profit economic profit no creates little incentive to holddown costs creating an inefficient and lazy monopoly Deregulating Monopolies dividing up the industry Power lines have large economies of scale natural monopoly and is not competitive if there is competition then will occur deregulation cost Benefit Analysis Market until Establishing Firms will position buy monopoly power the marginal cost of such powerequals modern competition is marginal benefit winner takes all Brand name Platform Monopolies firms can establish hibit network externalities with 2 implications monopolythrough branding 1 increase an industry to be winner takeall Starbucks first mover advantage explain high stock prices of up and coming tech  p g companies firms are spending money to gain market share so they will become the industrystandard technological lock in when use of a Technological standards may not technology makes the adoption 2 be the most efficient of subsequent technologies difficul inefficient but maintainedby first mover advantage Stocks Bonds Jordan Peterson people beliefs be shown by can whatthey do not what they say dart method randomselectment of investments is more successful than a calculated Efficient Market Hypothesis one Higher rate of EMH an investment theory return with radom selection that stock prices reflects all available information random managed so you cannot consistently Semi StrongForm All public Information beat the market aboutpublically traded Random Walk Hypothesis stock will be reflected financial theory stating that in their current share stock market prices evolve prices no investment in an unpredictable strategy can overcome way this Mutual Fund Index Fund vs invests in the stock of increase wealth by multiple companies passiveinvestment shareholders are diversified diversify investments less acrossthefunds holdings and risk can follow an index composition buy and sell their shares actively managed are not fees are bigger 21 actively managed don'ttry and beat the value of share in the fund market reflects the value of all the stock in the fund lower fees 41 5 forms of wealth Eliminates PrincipleAgent 1 h 1 1