- intra -

industry trade

↳ two way exchange of similar goods

Mc : defunct .

benefit from trade cost cut off

↳ two for
new channel welfare c* :
c* price out l -
IIT
benefit from me >
-

→
.

greater
,

variety price
.

a a lower
I shut down

y
Mr =p +
Sb

firm
q
a- O MR =p
to trade
.

response Bo

i"#mqcneuxay€m①
-

firm different cost curve produce different MC Tl

-

, c. p
T t MC T
intercept It ( Tn )
( C ) ' '

c*

f .fi
. :

Mc > c* , loss
-

Same D ,
MR .

"Z shut down

I
-

- C , c c
,
T
"

i' msn.ase.to ::: ::c:# in:*: .io::c

' " . "
me .
.

.. ,

" tim '

maiming; insaner
than
"

Q
set P based
Q
,
MR =P C , C C*
profit
}
,
,

A Oi P :P , to Max
-
firm 1 .
= , on Q , on
profit

!
to b
clear P -

Ps max
Cz)
firm I C , ) > CP ,
-
, -

( P
.
- -
,

more O , set markup over mo ,

price produce
firm I set lower operating profit
,

does not enter into

-

F does not recovered

and
R C :

operating profit
-
=
.

( sunk cost )
firm survives produce
-

=
( p Xd ) -
( ( xd )

↳ can be written as the product of the markup X Q Elp -

c) XO ) , c c c.
*
,

higher profit than firm 2

i. firm I will have
differences across firm
difference based on MC
-

: performance
MC
MC will ① set low price but higher markup over
firm with
,
i. lower
Q
@ produce more
③ earn high profit

expected profit across all

i. profit difference between firms .
and entry occurs until
driven to zero
potential cost level are .

market size
Effect of increased

flatter lower vertical intercept

D
'
-

→ D , move ,

D IT different MC
-
effect of shift in on wt

*
'

c x c C* forced to exit
c
-
,

s) flatten D Clower slope ) C , p q

-
market site (
intercept Ft Tn winner
demand rotation tossers
-

outward
. -

1#
→

* t
cost cutoff C 'T I
fiore
-

Dd lower 1
-

I
-

÷:÷:÷÷÷÷÷÷÷÷÷÷÷÷÷÷÷:* .
D
1-4 MC
: lower cost firm thrive and increase profit 1
C
a c* ,
c*
. .

and market share

cost firm contract and highest cost

-

i. high
firm exit