ECON 2200 Lecture Notes - Lecture 6: Technological Change, Deadweight Loss, Oligopoly
ECON 2200
Lecture 6
• Ex: Standard Oil (Rockefeller)
o Industry with high fixed costs
▪ Kerosene for home use
o 1860s-70s: capacity > D
▪ crude oil price falling
▪ firms failing; profits erratic
o 1862-1878: Rockefeller acquires refineries in PA,NY, OH
▪ Owners often glad to sell
o 1878: Std Oil of Ohio controls 90% of U.S. refining capacity
o 1879: Trust formed to manage Std Oil of Ohio
o 1880-1892: Firms controlled by trust expands
o 1892: Ohio Supreme Ct. order dissolution of trust
o Following Court's order, Std Oil becomes a holding company
under NJ law.
▪ maintained some monopoly power for another 20-30 yrs.
o 1911: U.S. Supreme Ct dissolves Std. Oil
C. Vertical Merger Wave (1898-1904)
• Vertical merger:
o Forward
o Backward
• Urbanization - led to increased D for ...
1. Processed consumer goods
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