MGMT 4A Lecture Notes - Lecture 7: Nash Equilibrium, Monopolistic Competition, Oligopoly
Document Summary
Concerted actions by firms to restrict output and fix price. Ac decreases throughout relevant range of production, Economies of scale, large capital requirement, absolute cost advantages, Because there are only a small number of firms in an oligopoly, each has a relatively large share of the market high concentration. If there are high barriers to entry, it is easier to maintain oligopoly"s power. A-c: decreasing returns to scale; mes, plant size of ac, output. If a new firm tries to enter a plant size smaller than mes, it will be a higher cost producer and vulnerable to competitors. If firm builds plant size at mes, it must seize big market share. Rivals cut back, losses for everyone scale economy barriers deter entry into the industry and preserve oligopolistic structure. Gov license grants right to manufacture, sell, or use invention; time restricted. Sources patents, trade secrets, preferential access to raw materials. Cooperative, tacit collusion, explicit collusion, fix price/output.
