Oligopoly and Concentrated Markets
Rough mindmap of topics surrounding the oligopoly structure
- Created by: Aimen Kamran
- Created on: 28-05-13 15:18
View mindmap
- Oligopoly and concentrated markets
- market structure with small number of dominant firms
- Concentration ratios measure market share of biggest firms in the market
- Best defined by behavior not structure
- Market conduct of one firm affects that of the other
- Each firm needs to anticipate and consider reactions of other firms before making decisions e.g. about price
- Market conduct of one firm affects that of the other
- Competitive Oligopoly
- INTER DEPENDENT because must consider rivals' reactions
- INDEPENDENT because can make own decisions i.e. don't collude
- KINKED DEMAND CURVE THEORY
- Firms lack accurate info so prices are sticky because cause more/less than proportional changes. Expectations not always met.
- ASSUMING THEY DO NOT COLLUDE
- Criticism is that no explanation of how price is initially set. Only applies when cyclical changes in D, not for unstable or large changes.
- Firms lack accurate info so prices are sticky because cause more/less than proportional changes. Expectations not always met.
- INTER DEPENDENT because must consider rivals' reactions
- Aspects of pricing
- COST-PLUS: P = AFC + AVC + profit margin
- Price parallelism: same P
- From collusion or competition, difficult to say which
- Price Leadership: one firm leads P
- Limit Pricing - LR pr max not SR pr max
- Predatory pricing: deliberately P < C
- PRICE DISCRIMINATION
- Charging dif customers dif prices for same service.
- Can do so based on each consumer's personal PED for the g/s
- E.g. bulk buying or tied sales
- CONDITIONS NECESSARY
- Can identify dif sub-segments of market
- Consumer knowledge differs or choices are influenced by area etc. Varying importance of g/s
- PED dif
- Can prevent seepage
- Can identify dif sub-segments of market
- CONDITIONS NECESSARY
- E.g. dif ticket prices, off-peak/peak
- P dif for reasons NOT linked to COST
- E.g. bulk buying or tied sales
- Can do so based on each consumer's personal PED for the g/s
- Charging dif customers dif prices for same service.
Similar Economics resources:
Teacher recommended
Teacher recommended
Comments
Report