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NS4054 Fall Term 2015 Types of Competition. Spectrum of Competition 2.

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Presentation on theme: "NS4054 Fall Term 2015 Types of Competition. Spectrum of Competition 2."— Presentation transcript:

1 NS4054 Fall Term 2015 Types of Competition

2 Spectrum of Competition 2

3 Aspects of Competition 3

4 Perfect Competition Conditions for Pure Competition Composed of a large number of independent sellers The firms offer a standardized product This feature rules out non price competition – advertising, sales promotion No individual firm supplies enough of the product to influence its market price noticeably In a competitive industry, no artificial obstacles prevent new firms from entering or old firms from leaving the industry. Firms and the resources they employ are mobile In actual practice fairly rare – used in economics more to set a norm – this market structure produces the best result 4

5 Firm Cost Structure 5

6 Plot of Cost Structure 6

7 Dynamic Adjustent I 7

8 Dynamic Adjustment II 8

9 Monopoly: Cost and Revenue 9

10 Monopoly Optimization 10

11 Monopoly Price Discrimination 11

12 Regulating Monopolies 12

13 Evaluating Monopolies Short run vs long run Short run excess profits, higher prices, lower output levels than perfect competition Long run – more innovation, investment, higher wages Who are monopolists? Need to define market Are they natural monopolies? Issue of anti trust Cellophane Alcoa 13

14 Monopolistic Competition 14

15 Oligopolistic Industries 15

16 Example of Oligopoly 16

17 Oligopoly Game Theory 17

18 Constant Sum Game: Minimize Losses 18

19 First Oligopoly Model I 19

20 First Oligopoly Model II 20

21 First Oligopoly Model III 21

22 Colusive Oligopoly 22

23 Problem of Potential Entry 23

24 Dominant Firm Model 24

25 Sales Maximization Model 25


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