1. FIVE COMPETITIVE FORCES
UPSTREAM MARKETS
SUPPLIERS:
Competitive forces
through bargaining
and economic leverage V E R T I C A L O N S
HOR ZONTAL RELATIONSHIPS
PRODUCERS
OF SUBSTITUTES:
Competitive forces
through rivalry of
sellers in different
markets through
price, advertising,
lobbying etc.
COMPETITORS:
Competitive forces through rivalry of sellers in same market through price, advertising, lobbying etc.
POTENTIAL
COMPETITORS:
Competitive for ce
from threat of entry
BUYERS:
Competitive forces
through bargaining
and economic leverage
DOWNSTREAM MARKETS

2. MARKET BOUNDARIES
BUYER POINT OF VIEW: No potential seller exists outside of the market boundaries (within a reasonable price range)
SELLER POINT OF VIEW: No potential buyer exists outside of the market boundaries (within a reasonable price range)
BOTH POINTS OF VIEW MUST HOLD
CROSS PRICE ELASTICITY measures

3. MARKET BOUNDARIES X represents buyers O represents sellers X X O O X X

4. MONOPOLY UNIQUE ONE MANY OLIGOPOLY - FEW MANY MONOPOLISTIC
TYPE OF MARKET PRD DIFF. SELLERS BUYERS
MONOPOLY
OLIGOPOLY
MONOPOLISTIC
COMPETITION
MONOPSONY
OLIGOPSONY
BILATERAL
UNIQUE ONE MANY
FEW MANY
PRD DIFF. MANY MANY
STANDARD MANY MANY
MANY ONE
MANY FEW
ONE ONE
ONE FEW
FEW ONE
FEW FEW

5. Min Cost Lowest HighestNone Yes Min Price Yes Not Min Price Yes Not
TYPE OF MARKET OBJECTIVE P Q PRO- EFFI
FIT CIENT
MONOPOLY
OLIGOPOLY
Interdependence
MONOPOLISTIC
COMPETITION
MONOPSONY
OLIGOPSONY
BILATERAL
S.Run Profit Large Not
Mkt. Share Med. Not
Horizontal W A R
Customer None Exc.
Loyalty Cap.
Min Cost Lowest HighestNone Yes
Min Price Yes Not
Min Price Yes Not
Max Share ? Vertical
of Profit W A R
of Profit W A R

6. Blocked Impeded Easy Easy YES YES YES NO
CHARACTERISTIC MONO- OLIGO- MONO- COM-
POLY POLY POLIS- PETI-
TIC C. TION
One Few Many Many
Unique ? Yes No
Blocked Impeded Easy Easy
YES YES YES NO
STRUCTURE # firms?
differentiated?
entry is:
market power?
CONDUCT:
interdependece?
Marginal Cost Pricing?
PERFORMANCE:
High prices?
Economic Profits?
Efficient capacity util?
Efficient investment?
Allocatively Efficient?
NO YES NO NO
NO NO NO YES
Yes Yes Yes No
Yes Yes No No
No No Under Yes
No No No Yes

7. 4 COPIER PRODUCING PLANTS Price ($/copier) Most Efficient Investment#3 #4 #1 #2
Most Efficient
Investment
(lowest point)
LRAC
(envelope)
Copiers per month (000’s)

8. 4 COPIER PRODUCING
PLANTS
Price ($/copier)
LRMC
LRAC
Copiers per month

9. MARKET FIRM POINT OF VIEW
COMPETITION
Price ($/copier)
Price ($/copier)
SUPPLY
LRMC
LRAC
DEMAND
BILL 2 BILL 3BILL
Copiers per month
Copiers per month
MARKET FIRM POINT OF VIEW

10. MARKET FIRM POINT OF VIEW
COMPETITION
Price ($/copier)
Price ($/copier)
SRAC
SUPPLY A
SRAVC
SHUT DOWN PRICE B
SRMC
DEMAND
BILL 2 BILL 3BILL
Copiers per month
1000s Copiers per month
MARKET FIRM POINT OF VIEW

11. MARKET FIRM POINT OF VIEW
COMPETITION
Price ($/copier)
Price ($/copier)
SUPPLY
LRMC
PROFIT
LRAC
DEMAND
BILL 2 BILL 3BILL
Copiers per month
Copiers per month
MARKET FIRM POINT OF VIEW

12. MARKET FIRM POINT OF VIEW
ENTRY DUE TO PROFIT
Price ($/copier)
Price ($/copier)
SUPPLY
LRMC
SHIFT
LRAC
LOSS
DEMAND
BILL 2 BILL 3BILL
Copiers per month
Copiers per month
MARKET FIRM POINT OF VIEW

13. COMPETITIVE EQUILIBRIUM: THROUGH NATURAL MARKET FORCES
Price ($/copier)
Price ($/copier)
LRMC
SUPPLY
LRAC
DEMAND
BILL 2 BILL 3BILL
Copiers per month
1000s Copiers per month
MARKET FIRM POINT OF VIEW

14. PERFECT COMPETITION LOWEST PRICES (P= MIN SRAC)
NO LONG RUN PROFITS (P=LRAC)
EFFICIENT CAPACITY (SRAC THROUGH MIN OF LRAC)
FULLY UTILIZED CAPACITY (AT SAME OUTPUT AS MIN SRAC)
EFFICIENT ALLOCATION OF RESOURCES (P=MC)