微观经济学 平狄克 英文 chapter_12 Monopolistic C(精品·公开课件).ppt

Chapter 1 Chapter 12 Monopolistic Competition and Oligopoly Topics to be Discussed Monopolistic Competition Oligopoly Price Competition Competition Versus Collusion: The Prisoners’ Dilemma Topics to be Discussed Implications of the Prisoners’ Dilemma for Oligopolistic Pricing Cartels Monopolistic Competition Characteristics 1) Many firms 2) Free entry and exit 3) Differentiated product Monopolistic Competition The amount of monopoly power depends on the degree of differentiation. Examples of this very common market structure include: Toothpaste Soap Cold remedies Monopolistic Competition Toothpaste Crest and monopoly power Procter Gamble is the sole producer of Crest Consumers can have a preference for Crest---taste, reputation, decay preventing efficacy The greater the preference (differentiation) the higher the price. Monopolistic Competition Question Does Procter Gamble have much monopoly power in the market for Crest? Monopolistic Competition The Makings of Monopolistic Competition Two important characteristics Differentiated but highly substitutable products Free entry and exit A Monopolistically CompetitiveFirm in the Short and Long Run A Monopolistically CompetitiveFirm in the Short and Long Run Observations (short-run) Downward sloping demand--differentiated product Demand is relatively elastic--good substitutes MR P Profits are maximized when MR = MC This firm is making economic profits A Monopolistically CompetitiveFirm in the Short and Long Run Observations (long-run) Profits will attract new firms to the industry (no barriers to entry) The old firm’s demand will decrease to DLR Firm’s output and price will fall Industry output will rise No economic profit (P = AC) P MC -- some monopoly power Comparison of Monopolistically CompetitiveEquilibrium and Perfectly Competitive Equilibrium Monopolistic Competition Monopolistic Competition and Economic Efficiency The monopoly power (differentiation) yields a higher price than perfect competition.