11 A Appendix Monopolistic Competition and Oligopoly Mc
- Slides: 10
11 A Appendix Monopolistic Competition and Oligopoly Mc. Graw-Hill/Irwin Copyright © 2012 by The Mc. Graw-Hill Companies, Inc. All rights reserved.
Additional Game Theory Applications • Game theory explains mutual • interdependence and strategic behavior Collusion is beneficial to participants • Reduced uncertainty • Increased profits • May block entry LO 8 11 -2
A One-Time Game: Strategies • A one-time game • A simultaneous game • A positive sum game • A firm’s dominant strategy LO 8 11 -3
A One-Time Game: Strategies • Nash Equilibrium • Outcome from which neither firm wants to deviate • Current strategy viewed as optimal • Stable and persistent outcome LO 8 11 -4
A One-Time Game Dramco’s Price Strategy LO 8 International A National International Chipco’s Price Strategy • 2 competitors • 2 price strategies • Each strategy has a payoff matrix • Independent actions stimulate a response C $11 National B $11 $5 $5 $20 D $17 11 -5
Credible and Empty Threats • Credible Threats • A statement of coercion that is believable by the other firm • Can establish collusive agreements • A strong enforcer can prevent cheating • Can generate higher profits • May be countered with threat by rival • Empty Threats • A threat that is not believable by rival LO 8 11 -6
Repeated Games • Game that recurs • May cooperate and not compete • • LO 8 strongly Rival reciprocates Examples: Pepsi and Coke, Walmart and Target, Boeing and Airbus 11 -7
LO 8 Thirst. Q’s Advertising Strategy Promo Budget Normal Budget A $10 B $10 C $8 $8 $16 D $12 Normal Budget Promo Budget Thirst. Q’s Advertising Strategy 2 Cool’s Advertising Strategy Normal Budget Promo Budget 2 Cool’s Advertising Strategy Repeated Games A $11 B $11 C $10 $14 $15 D $13 11 -8
First-Mover Advantages • The firm that first moves: • May be better prepared • May preempt entry of rival • Rival must respond LO 8 11 -9
First-Mover Advantages Big Box strategies LO 8 Build A Don’t build Huge Box strategies Build Don’t build -$5 B -$5 C $0 $0 $12 D $0 $0 11 -10
- Chapter 7 section 3 monopolistic competition and oligopoly
- Difference between perfect competition and monopoly market
- Starbucks monopoly
- Fast food oligopoly or monopolistic competition
- Monopoly characteristics
- Monopoly vs monopolistic competition
- Market structure venn diagram
- Perfect competition vs monopolistic competition
- Difference between monopoly and monopolistic competition
- Market structure
- Difference between monopoly and monopolistic competition