寡头垄断与粘性价格

1、OligopolyChapter 16-2第一页，共四十二页。Models of Oligopoly BehaviorNo single general model of oligopoly behavior exists.第二页，共四十二页。OligopolyAn oligopoly is a market structure characterized by:Few firmsEither standardized or differentiated productsDifficult entry第三页，共四十二页。InterdependenceA key characteristic o

2、f oligopolies is that each firm can affect the market, making each firms choices dependent on the choices of the other firms. They are interdependent.第四页，共四十二页。Characteristics OligopolyOligopolies are made up of a small number of mutually interdependent firms.Each firm must take into account the exp

3、ected reaction of other firms.第五页，共四十二页。InterdependenceThe importance of interdependence is that it leads to strategic behavior.Strategic behavior is the behavior that occurs when what is best for A depends upon what B does, and what is best for B depends upon what A does.Oligopolistic behavior incl

4、udes both ruthless competition and cooperation. 第六页，共四十二页。Game TheoryStrategic behavior has been analyzed using the mathematical techniques of game theory.Game theory provides a description of oligopolistic behavior as a series of strategic moves and countermoves.第七页，共四十二页。Characteristics of Oligopo

5、lyOligopolies are made up of a small number of firms in an industryOligopolistic firms are mutually interdependentIn any decision a firm makes, it must take into account the expected reaction of other firmsOligopolies can be collusive or noncollusiveFirms may engage in strategic decision making wher

6、e each firm takes explicit account of a rivals expected response to a decision it is making16-8第八页，共四十二页。Models of Oligopoly BehaviorThere is no single model of oligopoly behaviorThe cartel model is when a combination of firms acts as if it were a single firm and a monopoly price is setAn oligopoly

7、model can take two extremes:The contestable market model is a model of oligopolies where barriers to entry and exit, not market structure, determine price and output decisions and a competitive price is setOther models of oligopolies give price results between the two extremes16-9第九页，共四十二页。The Carte

8、l ModelA cartel model of oligopoly is a model that assumes that oligopolies act as if they were a monopoly and set a price to maximize profitOutput quotas are assigned to individual member firms so that total output is consistent with joint profit maximizationIf oligopolies can limit the entry of ot

9、her firms, they can increase profits16-10第十页，共四十二页。Implicit Price CollusionExplicit (formal) collusion is illegal in the U.S. while implicit (informal) collusion is permittedImplicit price collusion exists when multiple firms make the same pricing decisions even though they have not consulted with o

10、ne anotherSometimes the largest or most dominant firm takes the lead in setting prices and the others follow16-11第十一页，共四十二页。Why Are Prices Sticky?One characteristic of informal collusive behavior is that prices tend to be sticky they dont change frequentlyInformal collusion is an important reason wh

11、y prices are stickyAnother is the kinked demand curveIf a firm increases price, others wont go along, so demand is very elastic for price increasesIf a firm lowers price, other firms match the decrease, so demand is inelastic for price decreases16-12第十二页，共四十二页。The Kinked Demand Curve GraphA gap in t

12、he MR curve exists A large shift in marginal cost is required before firms will change their priceQPQMC1DMRPIf P increases, others wont go along, so D is elastic If P decreases, other firms match the decrease, so D is inelasticMC2Gap16-13第十三页，共四十二页。The Contestable Market ModelThe contestable market

13、model is a model of oligopolies where barriers to entry and exit, not market structure, determine price and output decisions and a competitive price is setEven if the industry contains only one firm, it will set a competitive price if there are no barriers to entryMuch of what happens in oligopoly p

14、ricing is dependent on the specific legal structure within which firms interact16-14第十四页，共四十二页。Comparing Contestable Market and Cartel ModelsThe cartel model is appropriate for oligopolists that collude, set a monopoly price, and prevent market entryThe contestable market model describes oligopolies

15、 that set a competitive price and have no barriers to entryOligopoly markets lie between these two extremesBoth models use strategic pricing decisions where firms set their price based on the expected reactions of other firms16-15第十五页，共四十二页。New Entry as a Limit on the Cartelization Strategy and Pric

16、e WarsPrice wars are the result of strategic pricing decisions gone wildA predatory pricing strategy involves temporarily pushing the price down in order to drive a competitor out of businessThe threat of outside competition limits oligopolies from acting as a cartelThe threat will be more effective

17、 if the outside competitor is much larger than the firms in the oligopoly16-16第十六页，共四十二页。Why Are Prices Sticky?When there is a kink in the demand curve, there has to be a gap in the marginal revenue curve.The kinked demand curve is not a theory of oligopoly but a theory of sticky prices.第十七页，共四十二页。D

18、2The Kinked Demand CurveD1MR2MR1PriceQuantity0QPabcdMC0MC1第十八页，共四十二页。The Kinked Demand Curve第十九页，共四十二页。Game Theory and Strategic Decision MakingThe prisoners dilemma is a well-known game that demonstrates the difficulty of cooperative behavior in certain circumstances.第二十页，共四十二页。Game Theory and Stra

19、tegic Decision MakingIn the prisoners dilemma, where mutual trust gets each one out of the dilemma, confessing is the rational choice.第二十一页，共四十二页。Prisoners Dilemma and a Duopoly ExampleThe prisoners dilemma has its simplest application when the oligopoly consists of only two firmsa duopoly.第二十二页，共四十

20、二页。Prisoners Dilemma and a Duopoly ExampleBy analyzing the strategies of both firms under all situations, all possibilities are placed in a payoff matrix.A payoff matrix is a box that contains the outcomes of a strategic game under various circumstances. 第二十三页，共四十二页。Firm and Industry Duopoly Coopera

21、tive EquilibriumPricePrice575$800 700 600 500 400 300 200 100 0(a) Firms cost curves1 2 3 4 5 6 7 8Quantity (in thousands)MCATC$800 700 600 500 400 300 200 100 0 1 2 3 4 5 6 7 8 9 10 11Monopolist solution MRDCompetitive solutionMC(b) Industry: Competitive and monopolist solutionQuantity (in thousand

22、s)McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.第二十四页，共四十二页。Firm and Industry Duopoly Equilibrium When One Firm CheatsPricePricePrice$800 700 600 500 400 300 200 100 0$800 700 600 500 400 300 200 100 0$900 800 700 600 500 400 300 200 100 05505505501 2 3 4 5 6 71 2 3 4 5

23、 6 7AMCATCQuantity (in thousands)(a) Noncheating firms lossAMCATCQuantity (in thousands)(b) Cheating firms profitABC1 2 3 4 5 6 7 8Quantity (in thousands)(c) Cheating solutionNon-cheating firms outputCheating firms output McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.第二

24、十五页，共四十二页。Duopoly and a Payoff MatrixThe duopoly is a variation of the prisoners dilemma game.The results can be presented in a payoff matrix that captures the essence of the prisoners dilemma.第二十六页，共四十二页。B Cheats B Does not cheat A Does not cheat A CheatsB +$200,000B 0A 0A +$200,000B $75,000A $75,0

25、00A $75,000B $75,000The Payoff Matrix of Strategic Pricing Duopoly第二十七页，共四十二页。Dominant StrategyIn an oligopoly, firms try to achieve a dominant strategya strategy that produces better results no matter what strategy other firms follow.The interdependence of oligopolies decisions can often lead to th

26、e prisoners dilemma.第二十八页，共四十二页。Prisoners Dilemma第二十九页，共四十二页。Implicit Price CollusionFormal collusion is illegal in the U.S. while informal collusion is permitted.Implicit price collusion exists when multiple firms make the same pricing decisions even though they have not consulted with one another.

27、第三十页，共四十二页。Implicit Price CollusionSometimes the largest or most dominant firm takes the lead in setting prices and the others follow.第三十一页，共四十二页。Cooperation and CartelsIf the firms in an oligopoly cooperate, they may earn more profits than if they act independently.Collusion, which leads to secret

28、cooperative agreements, is illegal in the U.S., although it is legal and acceptable in many other countries.Price-Leadership Cartels may form in which firms simply do whatever a single leading firm in the industry does. This avoids strategic behavior and requires no illegal collusion.Implicit Price

29、Collusion第三十二页，共四十二页。Why Are Prices Sticky?Informal collusion is an important reason why prices are sticky.Another is the kinked demand curve.第三十三页，共四十二页。CartelsA cartel is an organization of independent firms whose purpose is to control and limit production and maintain or increase prices and profi

30、ts. Like collusion, cartels are illegal in the United States.第三十四页，共四十二页。Conditions necessary for a cartel to be stable (maintainable):There are few firms in the industry.There are significant barriers to entry.An identical product is produced.There are few opportunities to keep actions secret.There

31、 are no legal barriers to sharing agreements.第三十五页，共四十二页。OPEC as an Example of a CartelOPEC: Organization of Petroleum Exporting Countries.Attempts to set prices high enough to earn member countries significant profits, but not so high as to encourage dramatic increases in oil exploration or the pur

32、suit of alternative energy sources.Controls prices by setting production quotas for member countries.Such cartels are difficult to sustain because members have large incentives to cheat, exceeding their quotas.第三十六页，共四十二页。The Diamond CartelIn 1870 huge diamond mines in South Africa flooded the gem m

33、arket with diamonds. Investors at the time wanted to control production and created De Beers Consolidated Mines, Ltd., which quickly took control of all aspects of the world diamond trade.The Diamond Cartel, headed by DeBeers, has been extremely successful. While other commodities prices, such as gold and silver respond to economic conditions, diamonds prices have