Managerial Economics in a Global Economy Oligopoly PowerPoint Slides Prepared by Robert F. Brooker,...
-
Upload
jenny-bovey -
Category
Documents
-
view
238 -
download
0
Transcript of Managerial Economics in a Global Economy Oligopoly PowerPoint Slides Prepared by Robert F. Brooker,...
Managerial Economics in a Global Economy
Oligopoly
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
OligopolyFew sellers of a productNonprice competitionBarriers to entryDuopoly - Two sellersPure oligopoly - Homogeneous productDifferentiated oligopoly - Differentiated product
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Sources of OligopolyEconomies of scaleLarge capital investment requiredPatented production processesBrand loyaltyControl of a raw material or resourceGovernment franchiseLimit pricing
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Measures of OligopolyConcentration Ratios
4, 8, or 12 largest firms in an industry
Herfindahl Index (H)H = Sum of the squared market shares of all firms in an industry
Theory of Contestable MarketsIf entry is absolutely free and exit is entirely costless then firms will operate as if they are perfectly competitivePowerPoint Slides Prepared by
Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Kinked Demand Curve Model
Proposed by Paul SweezyIf an oligopolist raises price, other firms will not follow, so demand will be elasticIf an oligopolist lowers price, other firms will follow, so demand will be inelasticImplication is that demand curve will be kinked, MR will have a discontinuity, and oligopolists will not change price when marginal cost changes
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Kinked Demand Curve Model
P2 MC’
P1 K MC
P3 MC”
0 Q2 Q1 Q3
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Kinked Demand Curve Model
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
CartelsCollusion
Cooperation among firms to restrict competition in order to increase profits
Market-Sharing CartelCollusion to divide up markets
Centralized CartelFormal agreement among member firms to set a monopoly price and restrict outputIncentive to cheat
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Centralized Cartel
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Kartel yang terdiri atas 2 perusahaan mengahadapi fungsi permintaan sbb:Q = 120 – 10P, atau P = 12 – 0.1QFungsi biaya masing-masing perusahaan adalah:TC1 = 4Q1 + 0.1Q1
2
TC2 = 2Q2 + 0.1 Q22.
a. Tentukan harga monopolinya.B. Berapa Q yang harus dproduksi oleh masing-masing perusahaan?
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Kartel yang terdiri atas 2 perusahaan mengahadapi fungsi permintaan sbb:Q = 120 – 10P, atau P = 12 – 0.1QFungsi biaya masing-masing perusahaan adalah:Cari MR, MC1, MC2, ƩMCTR = PQ = (12-0.1Q)Q= 12Q – 0.1Q2
MR = 12 – 0.2QMC1 = 4 + 0.2Q1 Q1= -20 + 5MC1
MC2 = 2 + 0.2Q2 Q2= -10 + 5MC2
ƩMC = MC1 + MC2Q = -30 + 10ƩMC 10ƩMC = 30 + Q ƩMC = (30 + Q)/10 = 3 + 0.1Q
MR = ƩMC 12 – 0.2Q = 3 + 0.1Q 0.3Q = 9
Q = 9/0.3 =30 P = 12- 0.1Q = 12 – 0.1*30 = 9
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
MR = 12 – 0.2Q = 12 – 0.2 * 30 = 6Q1MC1 = MR; 4 + 0.2Q = 60.2Q = 6-4=2Q = 2/0.2=10Q2MC2 = MR; 2 + 0.2Q = 60.2Q = 6-2=4Q = 4/0.2=20LABA:Perusahaan 1.AC1 = 4 + 0.1Q = 4 +0.1*10 = 4 +1 = 5TC = AC * Q = 5 *10 = 50TR = P*Q = 9*10 = 90Laba = TR – TC = 90 -50 =40Perusahaan 1.AC2 = 2 + 0.1Q = 2 + 0.1*20 = 2 + 2 = 4TC = AC * Q = 4 *20 = 80TR = P*Q = 9*20 = 180Laba = TR – TC = 180 -80 =100
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Price LeadershipImplicit CollusionPrice Leader (Barometric Firm)
Largest, dominant, or lowest cost firm in the industryDemand curve is defined as the market demand curve less supply by the followers
FollowersTake market price as given and behave as perfect competitors
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Price Leadership
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Harmful Effects of Oligopoly
Price is usually greater then long-run average cost (LAC)Quantity produced usually does correspond to minimum LACPrice is usually greater than long-run marginal cost (LMC)When a differentiated product is produced, too much may be spent on advertising and model changes
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Sales Maximization ModelProposed by William BaumolManagers seek to maximize sales, after ensuring that an adequate rate of return has been earned, rather than to maximize profitsSales (or total revenue, TR) will be at a maximum when the firm produces a quantity that sets marginal revenue equal to zero (MR = 0)
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.
Sales Maximization Model
MR = 0 whereQ = 50
MR = MC whereQ = 40
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division
of Thomson Learning. All rights reserved.