Professional Documents
Culture Documents
Chapter 16
Oligopoly
Overview
Monopol
y
Tap
water
Cable
TV
Few
firms
Type of Products?
Differentiate
d products
Oligopol
y
Tennis
balls
Monopolist
ic
Competitio
n
Identica
l
product
s
Perfect
Competitio
n
Novels,
CD
Wheat
Crude oil
Movies
Milk
Hockey
Toothpas
Imperfect Competition
Monopolistic Competition
Many firms selling products that are similar but not
identical.
e.g. Movies, Soap, Toothpaste, Pizza.
Oligopoly
Only a few sellers, each offering a similar or identical
product.
e.g. Hockey skates (Bauer and CCM), Crude Oil
(OPEC), Automobiles, Steel,
Petrochemicals.
Price
$120
110
100
90
80
70
60
50
40
30
20
10
0
Total Revenue
$ 0
1,100
2,000
2,700
3,200
3,500
3,600
3,500
3,200
2,700
2,000
1,100
0
A Nash equilibrium is a
situation in which economic
agents interacting with one
another each chooses his/her
best strategy given the
strategies that all the others
have chosen.
100
75
Firm 2s Reaction
Curve
Firm 2s reaction curve shows how much it
will produce as a function of how much
it thinks Firm 1 will produce.
50 x
Nash Eqlbm
25
Firm 1s Reaction
Curve
25
50
75
100
Q2
A Non-Collusive Duopoly/Oligopoly
Oligopolies pursuing their own self-
analogi
Keputusan Eric
Mengaku
K
e
p
ut
u
sa
n
D
a
wi
n
Men
gak
u
Tutu
p
Mul
ut
Tutup Mulut
Eric dipenjara
Eric dipenjara 20
tahun
Strategi Dominan
(Dominant Strategy)
8 tahun
Bebas
Eric
Eric dipenjara 1
tahun
Pilihan Terbaik
Analogi 2
Keputusan Marlboro
K
e
p
ut
u
sa
n
C
a
m
el
Me
mas
ang
Ikla
n
Tida
k
Me
mas
ang
Ikla
n
Memasang Iklan
Tidak Memasang Iklan
Marlboro memperoleh keuntungan Marlboro
memperoleh
$3 miliar
keuntungan $2 miliar
Strategi Dominan
(Dominant Strategy)
Pilihan Terbaik
Perlombaan
reduce
production
raise prices and in turn raise
profits
At
criminal provisions
civil provisions
Competition Act
Criminal
Price
Game
Battle of Sexes
1. Beach Location Game
Two
Where
Beach
200 yards
Opera
Wrestling
2,1
0,0
Opera
0,0
1,2
Jim