Chapter 26 Oligopoly
Please
 

I.     Oligopoly Defines Barriers to entry allow a few a firms producing homogeneous or heterogeneous products with to some control price and quantity.
II.
    Kinked demand Interdependency of firms results in demand that is elastic at high prices and inelastic at low prices
III.   Collusive pricing (OPEC)
. A formal agreement to manipulate price to maximize profit
IV.   Price Leadership  A major player leads the way and others follow
V.    Economic analysis of oligopoly
Price higher than lowest point on ATC
VI    Restrictive vs. progressive oligopolies
Technology allows for both high profits and low price
VII.  Readings audios and videos
VIII. Game Theory
is used by oligopolies to model their behavior.

Editor's Notes: Part II Product and Factor Markets introduces 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  

Image result for OLigopoly Cartoons

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.


         

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

 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

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 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.

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 
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

Image result for OLigopoly Cartoons

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. 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 Gane

           5. Master the Rules of Competitive Behavior! Order "Games People Play", on DVD!
               is a course on Game Theory used by
dependent companies controlling a
               substantial portion of a market. 

Practice Quizzes

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

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

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