ECO101H1 Lecture Notes - Monopoly Price, Blackberry Limited, Demand Curve

140 views4 pages
16 Oct 2011
School
Department
Course
Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Topic 10 Oligopoly
(Week ten Nov 16th - Nov 24th)
Outline:
1. Oligopoly Key Features
2. Monopoly profits for Oligopolists: Cartel
3. Firm cheats; Carte Breaks down;
4. Prisoners Dilemma Pay-off Matrix
5. Application Ban on TV Advertising
Opening Example: Research In Motion
RIM plans to introduce a new kind of tablet called PlayBook.
Questions: -- What price should it set?
-- What features should it have (i.e. size, color);
-- What date to introduce?
These answers depend upon what RIM believes Apple Inc. will do with its iPad, in response.
RIM is an oligopolist. Its strategic decisions reflect anticipated response of its rivals.
Oligopoly Key Features:
a) No single theory about Oligopoly;
b) Economic profits can range from nil to monopoly level;
c) Mutual Interdependence among firms is central to analysis:
-- Oligopolistic firms within an industry are aware that the behavior of one firm will influence others.
Examples Monopoly VS Oligopolists
Assume (for simplicity): MC=0=ATC (e.g. town wells)
Market Demand Schedule
Total Revenue (=profit)
P
Q
80
20
1600
70
25
1750
60
30
1800
50
35
1750
40
40
1600
30
45
1350
1. Monopoly
-- Profit Maximizing: MR=MC=0
P=60, Q=30; profit = 1800.
-- Monopolist maximizes profit.
(* we know that atP=60,Q=30 MR=0 because at that point the total
revenue stops increasing.)
Price
PPrice
ee
MC
MR
DD
60
PPric
e
ee
Unlock document

This preview shows page 1 of the document.
Unlock all 4 pages and 3 million more documents.

Already have an account? Log in

Get access

Grade+
$10 USD/m
Billed $120 USD annually
Homework Help
Class Notes
Textbook Notes
40 Verified Answers
Study Guides
1 Booster Class
Class+
$8 USD/m
Billed $96 USD annually
Homework Help
Class Notes
Textbook Notes
30 Verified Answers
Study Guides
1 Booster Class