ECON 201 Lecture Notes - Lecture 22: Oligopoly, Nash Equilibrium, Market Power
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ECON 201 – Lecture 22 – Chapter 17
*All charts and graphs based off or replicated by Joel Han in class unless stated otherwise
Price Quantity Total Revenue Total Cost Profit
0 14 0 140 -140
5 13 65 130 -65
10 12 120 120 0
15 11 165 110 55
20 10 200 100 100
25 9 225 90 135
30 8 240 80 160
35 7 245 70 175
40 6 240 60 180
45 5 225 50 175
Why is Q = 4 an equilibrium?
oSuppose Comcast is producing Q = 4 and AT&T is producing Q = 4
Does AT&T want to produce a bit more?
Well, from previous notes we figured that if Comcast and AT&T both
produce a Q of 4, then P = 30, TR = 120, TC = 40, and profit = 80.
So, when Comcast is producing Q = 4 and AT&T is producing Q = 5, P
would equal 25, since on the table 9 units is 25. For AT&T, TR = 125, TC =
50, and profit = 75
So, AT&T’s best action is to produce Q=4 while Comcast produces
Q=4
find more resources at oneclass.com
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Document Summary
Econ 201 lecture 22 chapter 17. *all charts and graphs based off or replicated by joel han in class unless stated otherwise. Why is q = 4 an equilibrium: suppose comcast is producing q = 4 and at&t is producing q = 4. Well, from previous notes we figured that if comcast and at&t both produce a q of 4, then p = 30, tr = 120, tc = 40, and profit = 80. So, when comcast is producing q = 4 and at&t is producing q = 5, p would equal 25, since on the table 9 units is 25. So, at&t"s best action is to produce q=4 while comcast produces. Restricting output, increasing price: the more market power firms have, the more they"re able to restrict output for profit. Higher price: oligopoly between monopoly and social optimal output, duopoly: close to monopoly output, as number of firms increases, outcome gets closer to socially optimal level.
