Game Theory and Least-cost Monopolistic Competition Essay

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Chapter 11 LO 11.1, 11.2, 11.3, 11.4, 11.5, 11.6, 11.7

11.1 Identify and explain the characteristics of monopolistic competition.

Relatively large numbers

Product differentiation

Non-price competition

Easy entry conditions

11.2 Using revenue and cost information, determine the price, output, and profit for a firm in monopolistic competition in the short run.

? Describe the demand curve for monopolistic competitor.

? Calculate profit maximization in the monopolistically competitive market.

RULE OF MR = MC STILL APPLIES

Example: Figure11-1 text page 282

11.3 Describe long-run equilibrium in monopolistic competition.

? Define long-run in monopolistic competition.

? Compare the long-run equilibrium in monopolistic competition to perfect competition.

Example: Figure 11-2 text page 285

Economic Efficiency is P = MC = ATC

Allocative Efficiency P = MC right amount of resources are used for the P

Productive Efficiency P = Min ATC lowest price for the least-cost

Monopolistic Competition is P = MC no under allocation (P above MC) P = min ATC no not min cost

11.4 Identify and explain the characteristics of oligopoly.

Fewness

Homogeneous or differentiated products

Mutual interdependence

Economies of scale

Barriers to Entry

The Urge to Merge Horizontal Merger Vertical Merger Conglomerate

Concentration ratios
Example: Four firm sales concentration ratio

11.5 Identify and explain the types of pricing behaviour that can occur in oligopoly.

? Identify game theory oligopolists may use. Best response function
Game theory models
Cooperative game
Noncooperative games

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