1. Oligopoly Pricing
Chapter 16 completion

2. Why People/Firms Sometimes Cooperate
Price fixing is using collusion among competitors to fix prices
If firms cooperate oligopoly prices rise toward monopoly prices
If firms focus on future profits they are more likely to cooperate in repeated games than cheat in a single game
Lesson: Collusion among firms is more likely in long run!

3. Illegal Pricing Practices. . .

4. Concentration Ratio Measure of the % of market 4 firms control
Economists believe 40% & higher is the standard for oligopolies
86%
4 Firm Concentration Ratio
Cigarettes 99%
Batteries 90%
Breweries 89%
Light Bulbs 89%
Wireless 86%
Cereals 83%
OPEC = 50%

5. Oligopolies: Maximizing Profit
Oligopolists could maximize profits by forming a cartel & acting like a monopolist
However, if oligopolists make decisions individually oligopoly equilibrium :
Quantity is higher
Price is lower
Profit is lower
DWL is smaller
Monopoly
versus

6. Monopoly vs. Oligopoly vs. Competitive
As the # of sellers in an oligopoly rises, the market looks more like a competitive market
Price approaches marginal cost & quantity approaches the socially efficient level (P = MC) (allocative efficiency!)

7. Game Theory
Handout

8. Article: Rise of Oligopolies
Why Now? Potential Benefits Risks

9. Game Theory Video