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Dr. Utpal Chattopadhyay Asst. Professor, NITIE
Dr. Utpal Chattopadhyay Asst. Professor, NITIE
Monopolistic
Competition
Many firms
Differentiated products (is in general a
strategic marketing goal) products are
close substitutes to each other;
Demand curve not completely flat
Firms do not react to each others actions
(because there are so many)
Easy entry and exit
Behavior of monopolistically
competitive firms
Short-run equilibrium
Long-run equilibrium
Profit-maximization
condition met (MC=MR)
Problem: production is
not cost-efficient
Long-run average
costs not at minimum
cost of product
variety
Summary-Monopolistic
Competition
Oligopoly
B. Cournot Model
Oligopoly - Bertrand
Model
Oligopoly - Chamberlin
(Monopolistic Competition)
Oligopoly - Stackelberg
Model -Price Leadership
Automotive industry
Banking Industry
Oligopoly - Stigler's
Theory
Stigler example
Oligopoly
Oligopoly
Oligopoly
Mr. A
Confesses
Remains
Silent
Mr. B
Confesses
Remains
Silent
[-5,-5]
[0,-20]
[-20,0]
[-1,-1]
Oligopoly
Duopolist's Dilemma
Firm A
Firm B
Cut Price (Rs.
12)
[720,720]
[1440,0]
Can Collusion be
beneficial?
Example
Can Collusion be
beneficial?
Indivisibilities in production.