MONOPOLISTIC

COMPETITION
MONOPOLISTIC
COMPETITION

• A market structure characterized by a large number of sellers of differentiated

product.
• Many sellers and buyers
• Differentiated product
• Perfect mobility of resources
• Example: Fast-food outlets
 MONOPOLISTIC COMPPETITION
CHARACTERISTICS

 Large numbers of buyers and sellers

 Product heterogeneity
 Free entry and exit
 Perfect dissemination of information
 Opportunity for normal profits in long-run equilibrium
MONOPOLISTIC COMPETITION
PRICE-OUTPUT DECISIONS
SHORT-RUN IN MONOPOLISTIC
COMPETITION
LONG-RUN IN MONOPOLISTIC
COMPETITION
OLIGOPOLY

 a market structure characterized by few sellers and interdependent price

-output decision.
 Few sellers and many buyers
 Product may be homogeneous or differentiated
 Barriers to resource mobility
 Example: Automobile manufacturers
OLIGOPOLY MARKET
CHARACTERISTICS

 Few sellers
 Homogenous or unique products
 Blockaded entry or exit
 Imperfect dissemination of information
 Opportunity for economic profits in long-run equilibrium
 OLIGOPOLY OUTPUT-SETTING
DUOPOLY MODELS
 COURNOT MODEL
theory that firms oligopoly markets
make simultaneous and independent
output decision.
 Developed by French Economist
Augustin Cournot in 1838.
COURNOT EQUILIBRIUM
--No firm can gain by unilaterally changing its own
output to improve its profit.
--A point where the two firms best response functions
intersect.
 OLIGOPOLY OUTPUT-SETTING
DUOPOLY MODELS

 STACKELBERG MODEL
--theory of sequential output decision in oligopoly markets.
--It is a strategic game
--Developed by a German Economist Heinrich Von Stackelberg in 1934.
First-Mover
--A Firm that the one who first initiates.
 PRICE SIGNALING
--It is an announcing of pricing strategy in the hope that competitors will follow
suit.
--Occurs when some competitors can produce at two different quality levels.
 PRICE LEADERSHIP
situation in which one firm establishes itself as the industry trendsetter and all
other firms in the industry accept its pricing policy.
OLIGOPOLY PRICING WITH DOMINANT
FIRM PRICE LEADERSHIP

 STACKELBERG EQUILIBRIUM
it is an equilibrium in which one company acts
as a leader and the other company acts as
a follower, where in the leader firm moves first
And the follower firm follows it later.
Swezzy Oligopoly

 Tendency to follow rival price decreases but ignore rival price increases.
 Kinked Demand Curve
REFERENCES:

 http://
www.economicsdiscussion.net/oligopoly/oligopoly-models-sweezys-kinked-demand-curve-model-and-collu
sion-model/3781
 http://
www.economicsdiscussion.net/oligopoly/oligopoly-models-sweezys-kinked-demand-curve-model-and-collu
sion-model/3781
 https://kmlv.github.io/Econ100A_F17/S14_Oligopoly_Ch28/
 https://
www.dummies.com/education/economics/how-to-compete-the-cournot-model-of-duopolies-in-managerial-e
conomics/
 https://www.researchgate.net/figure/Monopolistic-competition-Short-run-equilibrium_fig1_315164740
 https://sites.google.com/site/maeconomicsku/home/monopolistic-competition
THANK YOU!
REPORTER:
MARY GRACE A. PILONGCO
BSA 1-2