Jean J. Gabszewicz
- Published in print:
- 2000
- Published Online:
- November 2003
- ISBN:
- 9780198233411
- eISBN:
- 9780191596292
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198233418.001.0001
- Subject:
- Economics and Finance, Microeconomics
Perfect competition provides a model of a frictionless economy in which economic agents behave independently of each other, abandoning to the market the task of coordinating their individual ...
More
Perfect competition provides a model of a frictionless economy in which economic agents behave independently of each other, abandoning to the market the task of coordinating their individual decisions. This model is extensively studied in traditional price theory textbooks.Imperfect competition is the paradigm that develops when, on the contrary, economic agents interact in a conscious manner, which is necessarily the case when competition takes place ‘among the few’. In this system, agents act strategically, taking into account the impact of their own decisions on competitors ‘behaviour and on the price mechanism. Such situations commonly arise when firms differentiate their products, erect strategic entry barriers, or exploit the imperfect information of their customers about the price or characteristics of their product.This book explores the theoretical richness of these economic contexts, using some basic concepts of game theory. The four assumptions underlying the paradigm of perfect competition (no barriers to entry, large number of agents, product homogeneity, and perfect information) constitute the natural departure points of the theories of imperfect competition: whenever at least one of these assumptions is violated, imperfect competition is present. The framework of the book is organized around the four corresponding themes: the role of collusion and entry barriers in the degree of market competition (Ch. 3), product differentiation (Ch. 4) and the information of agents as an instrument of competition (Ch. 5). Finally, Ch. 6 illustrates the possibility of extending the theory to a general equilibrium framework.Less
Perfect competition provides a model of a frictionless economy in which economic agents behave independently of each other, abandoning to the market the task of coordinating their individual decisions. This model is extensively studied in traditional price theory textbooks.
Imperfect competition is the paradigm that develops when, on the contrary, economic agents interact in a conscious manner, which is necessarily the case when competition takes place ‘among the few’. In this system, agents act strategically, taking into account the impact of their own decisions on competitors ‘behaviour and on the price mechanism. Such situations commonly arise when firms differentiate their products, erect strategic entry barriers, or exploit the imperfect information of their customers about the price or characteristics of their product.
This book explores the theoretical richness of these economic contexts, using some basic concepts of game theory. The four assumptions underlying the paradigm of perfect competition (no barriers to entry, large number of agents, product homogeneity, and perfect information) constitute the natural departure points of the theories of imperfect competition: whenever at least one of these assumptions is violated, imperfect competition is present. The framework of the book is organized around the four corresponding themes: the role of collusion and entry barriers in the degree of market competition (Ch. 3), product differentiation (Ch. 4) and the information of agents as an instrument of competition (Ch. 5). Finally, Ch. 6 illustrates the possibility of extending the theory to a general equilibrium framework.
George J. Mailath and Larry Samuelson
- Published in print:
- 2006
- Published Online:
- January 2007
- ISBN:
- 9780195300796
- eISBN:
- 9780199783700
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195300796.003.0011
- Subject:
- Economics and Finance, Behavioural Economics
This chapter illustrates how the theory of repeated games with imperfect public monitoring can be used in economic applications. It examines collusion in oligopoly with imperfectly monitored demand, ...
More
This chapter illustrates how the theory of repeated games with imperfect public monitoring can be used in economic applications. It examines collusion in oligopoly with imperfectly monitored demand, oligopoly games with privately observed costs and hence adverse selection, risk sharing and insurance, and repeated principal-agent problems. The latter example also illustrates review strategies.Less
This chapter illustrates how the theory of repeated games with imperfect public monitoring can be used in economic applications. It examines collusion in oligopoly with imperfectly monitored demand, oligopoly games with privately observed costs and hence adverse selection, risk sharing and insurance, and repeated principal-agent problems. The latter example also illustrates review strategies.
Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.003.0007
- Subject:
- Economics and Finance, Economic History
This chapter assesses the relationship between modern oligopoly theory and the meaning of the agreement requirement. Because competition law seeks to regulate oligopoly behavior and, moreover, to ...
More
This chapter assesses the relationship between modern oligopoly theory and the meaning of the agreement requirement. Because competition law seeks to regulate oligopoly behavior and, moreover, to ground such regulation in modern economic understandings, it would seem to follow that, if the law's notion of agreement reflects economic substance, the agreement requirement would correspond to a core distinction drawn in oligopoly theory. As it turns out, that theory, which is an application of game theory (particularly, that of repeated games), does have an explicit notion of agreement. But this notion refers to binding agreements and thus is irrelevant for present purposes because competition law renders horizontal price-fixing agreements void ab initio.Less
This chapter assesses the relationship between modern oligopoly theory and the meaning of the agreement requirement. Because competition law seeks to regulate oligopoly behavior and, moreover, to ground such regulation in modern economic understandings, it would seem to follow that, if the law's notion of agreement reflects economic substance, the agreement requirement would correspond to a core distinction drawn in oligopoly theory. As it turns out, that theory, which is an application of game theory (particularly, that of repeated games), does have an explicit notion of agreement. But this notion refers to binding agreements and thus is irrelevant for present purposes because competition law renders horizontal price-fixing agreements void ab initio.
Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- book
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.001.0001
- Subject:
- Economics and Finance, Economic History
Throughout the world, the rule against price fixing is competition law's most important and least controversial prohibition. Yet there is far less consensus than meets the eye on what constitutes ...
More
Throughout the world, the rule against price fixing is competition law's most important and least controversial prohibition. Yet there is far less consensus than meets the eye on what constitutes price fixing, and prevalent understandings conflict with the teachings of oligopoly theory that supposedly underlie modern competition policy. This book offers a fresh, in-depth exploration of competition law's horizontal agreement requirement, presents a systematic analysis of how best to address the problem of coordinated oligopolistic price elevation, and compares the resulting direct approach to the orthodox prohibition. The book elaborates the relevant benefits and costs of potential solutions, investigates how coordinated price elevation is best detected in light of the error costs associated with different types of proof, and examines appropriate sanctions. Existing literature devotes remarkably little attention to these key subjects and instead concerns itself with limiting penalties to certain sorts of interfirm communications. Challenging conventional wisdom, the book shows how this circumscribed view is less well grounded in the statutes, principles, and precedents of competition law than is a more direct, functional proscription. More important, by comparison to the communications-based prohibition, the book explains how the direct approach targets situations that involve both greater social harm and less risk of chilling desirable behavior—and is also easier to apply.Less
Throughout the world, the rule against price fixing is competition law's most important and least controversial prohibition. Yet there is far less consensus than meets the eye on what constitutes price fixing, and prevalent understandings conflict with the teachings of oligopoly theory that supposedly underlie modern competition policy. This book offers a fresh, in-depth exploration of competition law's horizontal agreement requirement, presents a systematic analysis of how best to address the problem of coordinated oligopolistic price elevation, and compares the resulting direct approach to the orthodox prohibition. The book elaborates the relevant benefits and costs of potential solutions, investigates how coordinated price elevation is best detected in light of the error costs associated with different types of proof, and examines appropriate sanctions. Existing literature devotes remarkably little attention to these key subjects and instead concerns itself with limiting penalties to certain sorts of interfirm communications. Challenging conventional wisdom, the book shows how this circumscribed view is less well grounded in the statutes, principles, and precedents of competition law than is a more direct, functional proscription. More important, by comparison to the communications-based prohibition, the book explains how the direct approach targets situations that involve both greater social harm and less risk of chilling desirable behavior—and is also easier to apply.
Louis Galambos
- Published in print:
- 2004
- Published Online:
- September 2007
- ISBN:
- 9780199251902
- eISBN:
- 9780191719059
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199251902.003.0006
- Subject:
- Business and Management, Business History
In the 1980s, the Reagan Administration drastically altered American antitrust policy, virtually eliminating Section 2 cases involving monopolies. This chapter provides a context for that decision by ...
More
In the 1980s, the Reagan Administration drastically altered American antitrust policy, virtually eliminating Section 2 cases involving monopolies. This chapter provides a context for that decision by tracing the efforts that the federal government made since 1890 to reconcile an opposition to highly concentrated economic power with the even stronger enthusiasm Americans have always had for the economic success they associated with the nation's largest enterprises. In this setting, judges and government lawyers struggled over the years to come up with a clear concept of monopoly. In the global economy of the late 20th century, the Reagan policy innovation solved that problem and proved to be timely and significant. The new policy allowed American firms to get up to global scale, either through strategic alliances or through mergers that would not have been allowed under previous administrations.Less
In the 1980s, the Reagan Administration drastically altered American antitrust policy, virtually eliminating Section 2 cases involving monopolies. This chapter provides a context for that decision by tracing the efforts that the federal government made since 1890 to reconcile an opposition to highly concentrated economic power with the even stronger enthusiasm Americans have always had for the economic success they associated with the nation's largest enterprises. In this setting, judges and government lawyers struggled over the years to come up with a clear concept of monopoly. In the global economy of the late 20th century, the Reagan policy innovation solved that problem and proved to be timely and significant. The new policy allowed American firms to get up to global scale, either through strategic alliances or through mergers that would not have been allowed under previous administrations.
Leslie Hannah
- Published in print:
- 2009
- Published Online:
- September 2009
- ISBN:
- 9780199226009
- eISBN:
- 9780191710315
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199226009.003.0002
- Subject:
- Business and Management, Business History
The many errors and misjudgments in Alfred D. Chandler's Scale and Scope derive from its framing in an established Anglo-American Whig-Progressive misinterpretation of business and technological ...
More
The many errors and misjudgments in Alfred D. Chandler's Scale and Scope derive from its framing in an established Anglo-American Whig-Progressive misinterpretation of business and technological history. Case studies of copper and tobacco show that his narratives of global oligopolistic competition in these industries require complete inversion: his alleged successes are more appropriately cast as failures and vice-versa. Such cases are not unique, but representative. His central propositions — that the British were rarely capable of building efficient managerial hierarchies, distinctively preferred family to professional management and headquartered proportionately fewer persistent global industrial oligopolists than both Germany and the United States — have all been comprehensively falsified. Further progress in internationally comparative business history requires a return to the higher standards of Chandler's earlier work and more disciplined quantification of comparisons conceived without the bias of hindsight.Less
The many errors and misjudgments in Alfred D. Chandler's Scale and Scope derive from its framing in an established Anglo-American Whig-Progressive misinterpretation of business and technological history. Case studies of copper and tobacco show that his narratives of global oligopolistic competition in these industries require complete inversion: his alleged successes are more appropriately cast as failures and vice-versa. Such cases are not unique, but representative. His central propositions — that the British were rarely capable of building efficient managerial hierarchies, distinctively preferred family to professional management and headquartered proportionately fewer persistent global industrial oligopolists than both Germany and the United States — have all been comprehensively falsified. Further progress in internationally comparative business history requires a return to the higher standards of Chandler's earlier work and more disciplined quantification of comparisons conceived without the bias of hindsight.
Ken Binmore
- Published in print:
- 2007
- Published Online:
- May 2007
- ISBN:
- 9780195300574
- eISBN:
- 9780199783748
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195300574.003.0010
- Subject:
- Economics and Finance, Microeconomics
This chapter is an introduction to the theory of imperfectly competitive markets — a subject that was largely terra incognita before the advent of game theory. The models studied include those of ...
More
This chapter is an introduction to the theory of imperfectly competitive markets — a subject that was largely terra incognita before the advent of game theory. The models studied include those of Cournot, Bertrand, and Stackelberg. An unusual feature is a discussion of the Bertrand-Edgeworth model, both with efficient and proportional rationing.Less
This chapter is an introduction to the theory of imperfectly competitive markets — a subject that was largely terra incognita before the advent of game theory. The models studied include those of Cournot, Bertrand, and Stackelberg. An unusual feature is a discussion of the Bertrand-Edgeworth model, both with efficient and proportional rationing.
Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.003.0001
- Subject:
- Economics and Finance, Economic History
This chapter summarizes the book's main arguments. It sketches an overview of an analytical foundation for designing policy toward coordinated price elevation in oligopolistic industries, at the same ...
More
This chapter summarizes the book's main arguments. It sketches an overview of an analytical foundation for designing policy toward coordinated price elevation in oligopolistic industries, at the same time arguing for a straightforward approach to the issue. Systematic comparison with a more direct, functional approach reveals conventional means to be inferior and in important respects counterproductive in cases without smoking-gun evidence. In those settings, a direct approach dominates the conventionally favored communications-based prohibition in that the former targets situations that involve both greater social harm and less risk of chilling desirable behavior than those most likely to generate liability under the latter. The direct approach is also less difficult to administer, contrary to conventional wisdom.Less
This chapter summarizes the book's main arguments. It sketches an overview of an analytical foundation for designing policy toward coordinated price elevation in oligopolistic industries, at the same time arguing for a straightforward approach to the issue. Systematic comparison with a more direct, functional approach reveals conventional means to be inferior and in important respects counterproductive in cases without smoking-gun evidence. In those settings, a direct approach dominates the conventionally favored communications-based prohibition in that the former targets situations that involve both greater social harm and less risk of chilling desirable behavior than those most likely to generate liability under the latter. The direct approach is also less difficult to administer, contrary to conventional wisdom.
Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.003.0013
- Subject:
- Economics and Finance, Economic History
This chapter analyzes sanctions, concentrating primarily on deterrence. In many instances, reflecting current practice, the most important instruments are fines levied by government enforcers and, ...
More
This chapter analyzes sanctions, concentrating primarily on deterrence. In many instances, reflecting current practice, the most important instruments are fines levied by government enforcers and, where permitted, damages collected by injured parties. If the probability of sanctions and their magnitude are sufficient, most coordinated price elevation will be deterred. A major challenge in setting monetary sanctions is determining the extent of price elevation. The measurement problem is conceptually the same whether price elevation was accomplished through secret meetings, mere recognition of interdependence, or in any other manner. The threat of imprisonment as well as fines assessed against individual actors can be a useful supplement, particularly in light of agency problems within firms. Injunctions are also considered. Although much academic commentary fixates on injunctive relief, it is not evident that it is important in controlling coordinated oligopoly pricing.Less
This chapter analyzes sanctions, concentrating primarily on deterrence. In many instances, reflecting current practice, the most important instruments are fines levied by government enforcers and, where permitted, damages collected by injured parties. If the probability of sanctions and their magnitude are sufficient, most coordinated price elevation will be deterred. A major challenge in setting monetary sanctions is determining the extent of price elevation. The measurement problem is conceptually the same whether price elevation was accomplished through secret meetings, mere recognition of interdependence, or in any other manner. The threat of imprisonment as well as fines assessed against individual actors can be a useful supplement, particularly in light of agency problems within firms. Injunctions are also considered. Although much academic commentary fixates on injunctive relief, it is not evident that it is important in controlling coordinated oligopoly pricing.
Louis Kaplow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691158624
- eISBN:
- 9781400846078
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691158624.003.0019
- Subject:
- Economics and Finance, Economic History
This chapter links three arguments offered in favor of the traditional view to the foregoing analysis. One argument asserts a difficulty in attacking purely interdependent behavior because such would ...
More
This chapter links three arguments offered in favor of the traditional view to the foregoing analysis. One argument asserts a difficulty in attacking purely interdependent behavior because such would involve commanding firms to behave irrationally. Another objection is that making price elevation by oligopolists illegal is inconsistent with the legality of price elevation by monopolists. Third, it is argued that remedies, particularly injunctive relief, directed at price elevation are problematic because they amount to price regulation. The chapter analyzes each of these arguments in turn and provides counterpoints to these three claims. It also makes further arguments on the direct, economically based approach.Less
This chapter links three arguments offered in favor of the traditional view to the foregoing analysis. One argument asserts a difficulty in attacking purely interdependent behavior because such would involve commanding firms to behave irrationally. Another objection is that making price elevation by oligopolists illegal is inconsistent with the legality of price elevation by monopolists. Third, it is argued that remedies, particularly injunctive relief, directed at price elevation are problematic because they amount to price regulation. The chapter analyzes each of these arguments in turn and provides counterpoints to these three claims. It also makes further arguments on the direct, economically based approach.
Debraj Ray
- Published in print:
- 2007
- Published Online:
- January 2008
- ISBN:
- 9780199207954
- eISBN:
- 9780191709104
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199207954.003.0006
- Subject:
- Economics and Finance, Financial Economics
This chapter studies two applications of the theory developed so far. First, coalition formation in a Cournot oligopoly is examined. The second application studies coalition formation in a pollution ...
More
This chapter studies two applications of the theory developed so far. First, coalition formation in a Cournot oligopoly is examined. The second application studies coalition formation in a pollution control problem. In both these applications, equilibrium agreements and coalition structures are characterized by applying the algorithm developed in Chapter 5. While there are some differences between the two applications, they share the following common features: (a) inefficient outcomes are endemic despite the ability to write any binding agreement; (b) inefficient outcomes in symmetric games typically involve asymmetric coalition structures; but (c) the degree of inefficiency cannot be ‘too high’, in a sense made precise in the chapter.Less
This chapter studies two applications of the theory developed so far. First, coalition formation in a Cournot oligopoly is examined. The second application studies coalition formation in a pollution control problem. In both these applications, equilibrium agreements and coalition structures are characterized by applying the algorithm developed in Chapter 5. While there are some differences between the two applications, they share the following common features: (a) inefficient outcomes are endemic despite the ability to write any binding agreement; (b) inefficient outcomes in symmetric games typically involve asymmetric coalition structures; but (c) the degree of inefficiency cannot be ‘too high’, in a sense made precise in the chapter.
Hiroyuki Odagiri
- Published in print:
- 1994
- Published Online:
- November 2003
- ISBN:
- 9780198288732
- eISBN:
- 9780191596711
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198288735.003.0008
- Subject:
- Economics and Finance, South and East Asia
Competition, it is argued, is a behavioural concept, and the growth pursuit of Japanese firms and their preference for internal growth over mergers and acquisitions make the markets competitive, ...
More
Competition, it is argued, is a behavioural concept, and the growth pursuit of Japanese firms and their preference for internal growth over mergers and acquisitions make the markets competitive, probably more so than in other countries. This argument is consistent with the international comparison of the level and variance of profit rates, particularly the smaller inter‐firm variance of profit rates in Japan than in the USA and the UK.. The extent of the persistence of profits is also examined, which again suggests that a more competitive force is present in Japan. Finally, our study on structure‐performance correlation suggests that for Japan as well as for the USA, collusion of oligopolistic firms may have been dominant in the 1960s but has become rather irrelevant in recent years.Less
Competition, it is argued, is a behavioural concept, and the growth pursuit of Japanese firms and their preference for internal growth over mergers and acquisitions make the markets competitive, probably more so than in other countries. This argument is consistent with the international comparison of the level and variance of profit rates, particularly the smaller inter‐firm variance of profit rates in Japan than in the USA and the UK.. The extent of the persistence of profits is also examined, which again suggests that a more competitive force is present in Japan. Finally, our study on structure‐performance correlation suggests that for Japan as well as for the USA, collusion of oligopolistic firms may have been dominant in the 1960s but has become rather irrelevant in recent years.
W. Max Corden
- Published in print:
- 1997
- Published Online:
- November 2003
- ISBN:
- 9780198775348
- eISBN:
- 9780191715471
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198775342.003.0014
- Subject:
- Economics and Finance, International
Theories of strategic trade policy that allow for oligopoly and for strategic interactions, and which appear to justify trade interventions, are analysed sceptically. Also discussed is the industrial ...
More
Theories of strategic trade policy that allow for oligopoly and for strategic interactions, and which appear to justify trade interventions, are analysed sceptically. Also discussed is the industrial policy, and the argument that import protection may be justified if it fosters exporting.Less
Theories of strategic trade policy that allow for oligopoly and for strategic interactions, and which appear to justify trade interventions, are analysed sceptically. Also discussed is the industrial policy, and the argument that import protection may be justified if it fosters exporting.
Krishnendu Ghosh Dastidar, Hiranya Mukhopadhyay, and Uday Bhanu Sinha
- Published in print:
- 2011
- Published Online:
- September 2012
- ISBN:
- 9780198073970
- eISBN:
- 9780199081615
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198073970.003.0001
- Subject:
- Economics and Finance, Microeconomics
This book discusses various aspects of economic theory and quantitative techniques and their applications and relevance to policymaking. It features contributions from economists who have come ...
More
This book discusses various aspects of economic theory and quantitative techniques and their applications and relevance to policymaking. It features contributions from economists who have come together to honour Anjan Mukherji, arguably one of India's most distinguished economists. After providing a brief account of Mukherji's life and works, this chapter presents an overview of the book, which is divided into three parts. Part I deals with general equilibrium, macroeconomics, and economic dynamics; Part II focuses on applications of game theory to economics and information economics; while Part III explores India's socio-economic problems relating to India. Topics range from Markov processes to wealth effects, aspects of economic growth and applications of dynamic modelling to resource management and international competition, efficiency wages, collusion in oligopolies, cartels in international competition, price competition in a mixed duopoly, and strategic aspects of liability rules and liquidity preference.Less
This book discusses various aspects of economic theory and quantitative techniques and their applications and relevance to policymaking. It features contributions from economists who have come together to honour Anjan Mukherji, arguably one of India's most distinguished economists. After providing a brief account of Mukherji's life and works, this chapter presents an overview of the book, which is divided into three parts. Part I deals with general equilibrium, macroeconomics, and economic dynamics; Part II focuses on applications of game theory to economics and information economics; while Part III explores India's socio-economic problems relating to India. Topics range from Markov processes to wealth effects, aspects of economic growth and applications of dynamic modelling to resource management and international competition, efficiency wages, collusion in oligopolies, cartels in international competition, price competition in a mixed duopoly, and strategic aspects of liability rules and liquidity preference.
Fernando Vega‐Redondo
- Published in print:
- 1996
- Published Online:
- November 2003
- ISBN:
- 9780198774723
- eISBN:
- 9780191596971
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198774729.003.0005
- Subject:
- Economics and Finance, Microeconomics
The chapter introduces noise (conceived as mutation or experimentation) into evolutionary processes. This appears to be particularly well suited to tackle problems of equilibrium selection in games, ...
More
The chapter introduces noise (conceived as mutation or experimentation) into evolutionary processes. This appears to be particularly well suited to tackle problems of equilibrium selection in games, e.g. in coordination setups. It is also shown to be useful for understanding market behaviour, and the contrast between competitive and oligopolistic competition.Less
The chapter introduces noise (conceived as mutation or experimentation) into evolutionary processes. This appears to be particularly well suited to tackle problems of equilibrium selection in games, e.g. in coordination setups. It is also shown to be useful for understanding market behaviour, and the contrast between competitive and oligopolistic competition.
John P. Burkett
- Published in print:
- 2006
- Published Online:
- October 2011
- ISBN:
- 9780195189629
- eISBN:
- 9780199850778
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195189629.003.0005
- Subject:
- Economics and Finance, Microeconomics
This chapter examines the factors that influence the production decisions of competitive firms. It explains that a firm is usually assumed to produce the quantity of output that maximizes its profit, ...
More
This chapter examines the factors that influence the production decisions of competitive firms. It explains that a firm is usually assumed to produce the quantity of output that maximizes its profit, defined as total revenue minus total cost, and that the long-run supply curve of a competitive firm consists of the portion of the vertical axis beneath minimum and the portion of the marginal cost curve above minimum. Profit maximization depends on market structure and the four commonly recognized structures include perfect competition, monopoly, monopolistic competition, and oligopoly.Less
This chapter examines the factors that influence the production decisions of competitive firms. It explains that a firm is usually assumed to produce the quantity of output that maximizes its profit, defined as total revenue minus total cost, and that the long-run supply curve of a competitive firm consists of the portion of the vertical axis beneath minimum and the portion of the marginal cost curve above minimum. Profit maximization depends on market structure and the four commonly recognized structures include perfect competition, monopoly, monopolistic competition, and oligopoly.
John P. Burkett
- Published in print:
- 2006
- Published Online:
- October 2011
- ISBN:
- 9780195189629
- eISBN:
- 9780199850778
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195189629.003.0015
- Subject:
- Economics and Finance, Microeconomics
This chapter examines the classic models of the microeconomic theories of oligopoly and oligopsony. It explains that oligopoly is a market structure in which there are only a few important sellers ...
More
This chapter examines the classic models of the microeconomic theories of oligopoly and oligopsony. It explains that oligopoly is a market structure in which there are only a few important sellers and oligopsony is one in which there are only a few important buyers. Under an oligopsonistic market, the profits of each buyer depend materially on the actions of other major buyers, while under its oligopolistic counterpart, firms are rivals and strategic interaction is important. This chapter also provides several relevant computational exercises and solutions.Less
This chapter examines the classic models of the microeconomic theories of oligopoly and oligopsony. It explains that oligopoly is a market structure in which there are only a few important sellers and oligopsony is one in which there are only a few important buyers. Under an oligopsonistic market, the profits of each buyer depend materially on the actions of other major buyers, while under its oligopolistic counterpart, firms are rivals and strategic interaction is important. This chapter also provides several relevant computational exercises and solutions.
John P. Burkett
- Published in print:
- 2006
- Published Online:
- October 2011
- ISBN:
- 9780195189629
- eISBN:
- 9780199850778
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195189629.003.0021
- Subject:
- Economics and Finance, Microeconomics
This chapter examines the origins and goals of game theory and the modern models of oligopoly. Game theory was developed by J. von Neumann and O. Morgenstern and it originally focused on the ...
More
This chapter examines the origins and goals of game theory and the modern models of oligopoly. Game theory was developed by J. von Neumann and O. Morgenstern and it originally focused on the strategic interaction of rational individuals who know each other to be rational, where rationality is interpreted as maximizing expected utility. Modern oligopoly models were developed to address the predictive shortcomings of traditional game theory. Economic theorists assert that many people are more altruistic but less rational than had been assumed by traditional game theorists. This chapter provides several relevant computational exercises and solutions.Less
This chapter examines the origins and goals of game theory and the modern models of oligopoly. Game theory was developed by J. von Neumann and O. Morgenstern and it originally focused on the strategic interaction of rational individuals who know each other to be rational, where rationality is interpreted as maximizing expected utility. Modern oligopoly models were developed to address the predictive shortcomings of traditional game theory. Economic theorists assert that many people are more altruistic but less rational than had been assumed by traditional game theorists. This chapter provides several relevant computational exercises and solutions.
Lynn K. Mytelka
- Published in print:
- 2002
- Published Online:
- November 2003
- ISBN:
- 9780199258178
- eISBN:
- 9780191595868
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199258171.003.0008
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Assesses the contribution of international interfirm technology agreements to enterprise learning and innovation by situating these agreements in the broader context of changes in the structure of ...
More
Assesses the contribution of international interfirm technology agreements to enterprise learning and innovation by situating these agreements in the broader context of changes in the structure of industry on a global scale and of competition within it. The first section presents a taxonomy that distinguishes traditional forms of one‐way interfirm agreements from two‐way collaborative partnerships in research and development (R&D), production, and distribution, and illustrates the way in which the latter have contributed to joint knowledge production and sharing in industries as diverse as information technology, biopharmaceuticals, and automobiles. The second section explores in greater depth the role that R&D‐consortia play in strengthening the potential for innovation, particularly in small‐ and medium‐sized enterprises, and in industries undergoing a process of catch‐up; as firms encounter each other across multiple technology partnerships, opportunities for learning each other's strategies also increase and so, too, do the incentives for collusion. The third section draws a distinction between the static barriers to entry that result from mergers and acquisitions and traditional forms of oligopoly, and the dynamic entry barriers that are made possible through the emergence of knowledge‐based networked oligopolies on a global scale. These, the last section argues, have the potential to become powerful selection mechanisms that create differential access to learning across firms and geographical space.Less
Assesses the contribution of international interfirm technology agreements to enterprise learning and innovation by situating these agreements in the broader context of changes in the structure of industry on a global scale and of competition within it. The first section presents a taxonomy that distinguishes traditional forms of one‐way interfirm agreements from two‐way collaborative partnerships in research and development (R&D), production, and distribution, and illustrates the way in which the latter have contributed to joint knowledge production and sharing in industries as diverse as information technology, biopharmaceuticals, and automobiles. The second section explores in greater depth the role that R&D‐consortia play in strengthening the potential for innovation, particularly in small‐ and medium‐sized enterprises, and in industries undergoing a process of catch‐up; as firms encounter each other across multiple technology partnerships, opportunities for learning each other's strategies also increase and so, too, do the incentives for collusion. The third section draws a distinction between the static barriers to entry that result from mergers and acquisitions and traditional forms of oligopoly, and the dynamic entry barriers that are made possible through the emergence of knowledge‐based networked oligopolies on a global scale. These, the last section argues, have the potential to become powerful selection mechanisms that create differential access to learning across firms and geographical space.
Eli M. Noam
- Published in print:
- 2009
- Published Online:
- October 2011
- ISBN:
- 9780195188523
- eISBN:
- 9780199852574
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195188523.003.0011
- Subject:
- Business and Management, Information Technology
This chapter examines market concentration trends in the telecommunications industry in the United States. The overall concentration trend of the telecom sector has been strongly U-shaped; this ...
More
This chapter examines market concentration trends in the telecommunications industry in the United States. The overall concentration trend of the telecom sector has been strongly U-shaped; this concentration declined significantly in 1983 with the AT&T divestiture; a gradual decline occurred from 1984 to 1996, the multichannel phase of communications media; this was followed by a pronounced reconcentration. The chapter then turns to the equipment side of the sector. Traditionally, telecommunications equipment industries were divided into two categories based on the destination of their products: fairly simple consumer and office-oriented “customer premises equipment”, and carrier-oriented network equipment. As instability became part of the environment, telecom companies responded in three ways: by cutting costs and prices, by creating differentiated products and services, and by reducing competition and the commoditization that lowers profitability and future investments. The third response requires market power, which leads to consolidation of firms into oligopoly. This is a main driver of concentration trends in the telecommunications sector.Less
This chapter examines market concentration trends in the telecommunications industry in the United States. The overall concentration trend of the telecom sector has been strongly U-shaped; this concentration declined significantly in 1983 with the AT&T divestiture; a gradual decline occurred from 1984 to 1996, the multichannel phase of communications media; this was followed by a pronounced reconcentration. The chapter then turns to the equipment side of the sector. Traditionally, telecommunications equipment industries were divided into two categories based on the destination of their products: fairly simple consumer and office-oriented “customer premises equipment”, and carrier-oriented network equipment. As instability became part of the environment, telecom companies responded in three ways: by cutting costs and prices, by creating differentiated products and services, and by reducing competition and the commoditization that lowers profitability and future investments. The third response requires market power, which leads to consolidation of firms into oligopoly. This is a main driver of concentration trends in the telecommunications sector.
