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November 14 Lecture Notes EC 110

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EC 110
Kent Zirlott

Key: Examples Formula Emphasis Definition Notes Reference 1) Measuring Market Concentration a. Concentration Ratio: The percentage of the market’s total output supplied by its four largest firms b. The higher the concentration ratio c. This chapter focuses on oligopoly a market structure with high concentration 2) Oligopoly a. Oligopoly: a market structure in which only a few sellers offer similar or identical products b. Strategic behavior in oligopoly: A firm’s decisions about P or Q can affect other firms because them to react. The firms will consider these reactions when making decisions c. Game Theory: the study of how people behave in strategic situations d. Duopoly i. Duopoly: an oligopoly with two firms ii. Example: 1. Two firms- T-Mobile and Version 2. FC: $0, MC: $10, ATC: $10 P Q Revenue Cost Profit $0 140 $0 $1,400 -1,400 5 130 650 1,300 -650 10 120 1,200 1,200 0 15 110 1,650 1,100 550 20 100 2,000 1,000 1,000 25 90 2,250 900 1,350 30 80 2,400 800 1,600 35 70 2,450 700 1,750
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