ECON101 Lecture Notes - Lecture 14: Labatt Brewing Company, Market Power, Price Discrimination

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Olivia Mesta

Document Summary

The essence of an oligopolistic market is that there are only a few sellers. As a result, the actions of any one seller in the market can have a large impact on the profits of all the other sellers. The logic of the prisoners" dilemma applies in many situations, including advertising, common-resource problems and oligopolies: policymakers use the antitrust laws to prevent oligopolies from engaging in anticompetitive behaviour such as price-fixing. But the application of these laws is sometimes controversial because some behaviour that may seem to reduce competition may in fact have legitimate business purposes. Oligopoly: only a few sellers offer similar or identical products. Monopolistic competition: many firms sell similar but not identical products. Because an oligopolistic market has only a small group of sellers, a key feature of oligopoly is the tension between cooperation and self-interest: cooperating and acting like a monopolist. Producing a small quantity of output and charging a price above marginal cost.