Chapter 26 Oligopoly
A more concise One-Page Review of Chapter 26 may help with exams.  Updated 9//18/17  
 Please  
 

I. Oligopoly Defines
II. Kinked Demand
III. Collusive Pricing (OPEC)
IV. Price Leadership 

V. Economic Analysis of Oligopoly
VI. Restrictive vs. Progressive oligopolies

VII. Readings, Audios, Videos
VIII. Game Theory

Editor's Notes: Part II Product and Factor Markets iintroduces these markets



I. Oligopoly Defines
    A. An oligopoly market exists when barriers to entry result in a few producers.
         1. Products may be homogeneous or differentiated.
         2. Examples include many industrial products such as steel and consumer goods
             like soda. 
         3. Automobile, steel, game consoles and other oligopolistic industries lost monopoly
             power because of the foreign invasion beginning in the 1970's.
             a. Eventually American companies became more competitive.
             b. The price was lower real wages for manufacturing workers.
             c.  The oligopolistic nature of the video game consol market
         4. Concentration ratios measure the amount of total output controlled by a few firms.
             a. eight-firm concentration ratio - Amosweb is Economics ..
             b. four-firm concentration ratio -Amosweb

          5. Readings
              a. Six movie studios movie studios receive 90% of American film revenues.
              b. The television industry is mostly an oligopoly of five companies:
                   Disney/ABC , CBS Corporation
              c. NBC Universal Time Warner and News Corporation
              See Concentration of Media Ownership .
              d. Four major music companies receive 80% of recording revenues.
              e. Four wireless providers control 89% of the cellular telephone market.

              
f. There are just six major book publishers.
              g. Healthcare insurance in the United States consists of very few insurance
                  companies controlling major market share in most states. For example,
                  California's insured population of 20 million is the most competitive in the
                  nation and 44% of that market is dominated by two insurance 
                  companies,  Anthem and
Kaiser Permanante.
            
 h. Anheuser-Busch and Miller Coors control about 80% of the beer industry.   
        B. 
Three well-defined pricing models exist
              1. Kinked demand  

              2. Collusive pricing
              3. Price leadership 
Please  


       Unit I. Review
Barriers to entry allow a few a firms producing
                   homogeneous or heterogeneous products with
                   to some control price and quantity

II. Kinked demand  
     A. Describes a situation where a strong interdependency exists  among firms within an
          industry
     B. A firm's demand curve tends to be elastic above equilibrium price  as price increases
          are not followed by competitors. If they do follow, industry supply has changed.
     C. A firm's demand curve tends to be inelastic below equilibrium price as price
          decreases must be followed by competing firms.  If competitors do not follow,
          a monopoly situation could be developing. 
     D. This interdependency of pricing is studied with game theory models where players
          react to possible pricing situations in a similar manner to the strategy of people
          playing chess or poker.
      E. Econ Concepts in 60 Seconds: Kinked Demand Curve
      F. Kinked demand curve theory from You Tube
     G. Need more, try Kinked Demand from Amos Web.
 
   Unit II. Review Interdependency of firms results in demand that is elastic at
                high prices and inelastic at low prices
.

 

Image result for OLigopoly Cartoons

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

III. Collusive pricing (OPEC).
     
A. A formal agreement (cartel) or informal agreement among competitors to strict
           supply and benefit from the resulting high price 
     
B. See trustbusters have got better detecting cartels and bolder punishing them incentives
     
C. Inequality and the monopolies of unfettered techno markets
      D. Teddy Roosevelt takes on the trusts

Unit III. Review  A formal agreement to manipulate price to maximize profit

IV. Price Leadership
        A. A major player leads the way and others follow GM was a price leader
            until foreign competition made their market share too small to lead
        B. See
Price- Leadership Under Oligopoly

       Unit IV. Review
A major player leads the way and others follow

 

Free Books from When Oligopolies Ruled the Economy

How the Other Half Lives 1890's tenement life
Gilded Age The Mark Twain’s book on a wealthy society 
Jungle, The Upton Sinclair
Knowledge in Society, The Use of Friedrich Hayek leads traditionalist
Leviathan Thomas Hobbs begins social contract discussions
Muckrakers and their works
Octopus, The
A Story of California. Book 1 of a

return to  Free Economics Books 

 V. Economic analysis of oligopoly
   
A. Restrictive oligopolies tend to be very monopolistic in nature with
           1. P >
MR = MC
           2. Production is not at the lowest point indicated by the AT Curve.
           3. Economic profits exist and quantity is restricted.
      B. Progressive oligopolies have high economic profits in spite
of price decreases
          brought on by high-tech efficiencies.

Unit V. Review Price higher than lowest point on ATC

 

VI Restrictive vs. progressive oligopolies
      A. Restrictive oligopolies
           1. A few companies share a market creating a near monopoly situation.
           2. Example: Rust Belt industries in the United States before foreign competition.
      B. Progressive oligopolies
           1. Technology lowers cost and improves product quality.
           2. Companies must maintain technological base to survive.
           3. Low consumer prices, high product quality, and monopoly profits exist simultaneously. 
           4. As long as new product development causes growth in consumer demand, funds are
               provided for R & D and capital investment requirements.
           5. Examples include computer software and high-tech consumer electronics
           6. Once dominant software giant determined to prove life begins again at 40    4/4/15 

Unit VI. Review Technology allows for both high profits and low price

Image result for OLigopoly Cartoons

VII. Readings
       A.
Oligopoly Watch
       B.  Read POWER ELITES IN AMERICA: OLIGOPOLY AND POLITICAL PULL
             (OR, BEWARE THE REGULATORY-INDUSTRIAL COMPLEX), By Sam Wells
             for a conservative view for Monopoly development from Human Freedom and
             the Laissez-Faire Republic
       C. King On Knowledge, Power and Unchecked and Unbalances -  Audio
       D. Big banks are operating as an 'oligopoly Video
     
E. POWER ELITES & MONOPOLY POWER for a conservative view of monopoly power.  
            Interestingly, I couldn't find   much pro antitrust material. Reason-our competitive world.
   
    F. Listen to
The Limits of Power Bill Moyers sits down with history and international relations
            expert and
former US Army Colonel Andrew J. Bacevich who identifies three major
            problems facing our democracy: the crises of economy, government and militarism,
            and calls for a redefinition of the American way of life.
    
  G. Planned Obsolescence Disguised as Innovation, Oligopoly Disguised
       
  as a Free Market, and the Enrichment of Oligarchs
      
H. Robber Barons Who Built America
     
  I. See Progressive Era 15 min. video

VIII. Game theory is used by oligopolies to model their behavior.
       A. Econ Concepts in 60 Seconds Video on Oligopolies and Game Theory 
            
and
Dominate Strategy
    
 
B. Lectures
            1. Dominant Strategy
            2. Nash Equilibrium
            3. Golden Balls. the Weirdest Split or Steal Ever!
            4. Taking a Closer Look at Golden Balls  
     
  C. Examples 
           1. The Prisoners Dilemma #1      
Prisoner's Dilemma Game from Bryn Mawr College
           2.
Game Theory The Meeting Game
           3. Goldon Bollocks is a You Tube game theory game.
           4. A Money Game

           5. Lions And Lambs: Can You Solve This Classic Game Theory Puzzle?

Advanced Game Theory Materials from materials from Wikipedia

Practice Quizzes

amosweb practice test by specific topic.
Oligopoly, answers provided.

Monopolistic Competition and Oligopoly multiple
choice practice questions
, no answers provided

Please

  view  Topics in game theory  
Definitions Normal form game · Extensive form game · Cooperative game · Information set · Preference  
Equilibrium concepts Nash equilibrium · Subgame perfection · Bayes-Nash · Trembling hand · Correlated equilibrium · Sequential equilibrium · Quasi-perfect equilibrium · Evolutionarily stable strategy  
Strategies Dominant strategies · Mixed strategy · Grim trigger · Tit for tat  
Classes of games Symmetric game · Perfect information · Dynamic game · Repeated game · Signaling game · Cheap talk · Zero-sum game · Mechanism design  
Games Prisoner's dilemma · Coordination game · Chicken · Battle of the sexes · Stag hunt · Matching pennies · Ultimatum game · Minority game · Rock, Paper, Scissors · Pirate game · Dictator game · Public goods game  
Theorems Minimax theorem · Purification theorems · Folk theorem · Revelation principle · Arrow's Theorem  
Related topics Mathematics · Economics · Behavioral economics · Evolutionary game theory · Population genetics · Behavioral ecology · Adaptive dynamics · List of game theorists  
Last Chapter 

Chapter 26 Class Discussion Questions

Chapter 26 Homework Questions

Next Chapte

Table of Contents

 

 

 

 

Free Political Science Book Summaries

Presidential Courage
Brave Leaders and How They Changed America 1789-1989
,
 by Michael Beschloss,
8 pages, or

Second Chance

Three Presidents and the Crisis of America Superpower,
by Zbigniew Brzezinski, 6 pages, or

American Dynasty

Aristocracy, Fortune, and the Politics of Deceit in the House of Bush
,
 by Kevin Phillips
5 pages, or 

Don't Know Much About History
 
Everything You Need To Know About American History But Never Learned
 5 pages, by
Kenneth C. Davis