ECON 201 Lecture Notes - Lecture 16: Regulate (Song), Sherman Antitrust Act, Oligopoly
Document Summary
Chapter 11 continued: chara(cid:272)teristi(cid:272) #3: (cid:862)o(cid:859)s i(cid:374)terdepe(cid:374)de(cid:374)t(cid:863) (cid:449)hi(cid:272)h (cid:272)reates i(cid:374)(cid:272)e(cid:374)ti(cid:448)e to (cid:272)ollude, collusion: agreement among firms to avoid competitive practices (q decreases) illegal in us (cid:894)do(cid:374)(cid:859)t study(cid:895, for(cid:373)al agree(cid:373)e(cid:374)t: (cid:858)(cid:272)artel(cid:859) More difficult to prove interaction: law against colluding: (cid:862) her(cid:373)a(cid:374) a(cid:374)titrust a(cid:272)t of (cid:1005)(cid:1012)(cid:1013)(cid:1004)(cid:863) (beginning of anti-trust legislation. Gi(cid:448)es u. go(cid:448)er(cid:374)(cid:373)e(cid:374)t po(cid:449)er to : prosecute firms colluding in u. s, break up existing monopolies, prevent mergers that will reduce competition. John rockefeller, started standard oil firm, reasons for the start of sherman antitrust act: incentives to collude: Individual d curve more elastic than market d. If firms collude perfectly & do not compete: p = pm (a monopoly p) If firms do not collude: they compete independently. Firms undercut p of rivals to gain large increase in qd. Plr -= lr atc: usual outcome in market is between these 2 extremes. Co(cid:374)su(cid:373)ers (cid:272)a(cid:374)(cid:374)ot dire(cid:272)t the (cid:859)ers as (cid:449)ell: reduced competition, resources wasted: Fir(cid:373)s (cid:858)tryi(cid:374)g(cid:859) to (cid:373)ai(cid:374)tai(cid:374)/keep (cid:271)arriers: monopoly & oligopoly.