II Market Structure 2 Market Imperfection II Market

II. Market Structure: 2. Market Imperfection

II. Market Structure 2. Market Imperfection -(1). Market Imperfection – Basic Concept -(2). Categories of Markets -(3). Degrees and Concepts of Partial Competition -i. Ineffective Competition: Competition -(i). Monopoly -(ii). The Dominant Firm -(iii). Tight Oligopoly ii. Effective Competition : -(i). Loose Oligopoly -(ii). Monopolistic Competition -(iii). Pure Competition

III. Market Structure: 2. Market Imperfection -(1). Market Imperfection- Basic Concepts -i. Perfect competition involves pure competition in which -1. there a large number of buyers an sellers of -2. homogeneous product with -3. no obstacles to entry or exit of firms plus certain strict assumptions, as follows: -4. perfect knowledge, -5. perfect mobility, -6. rational behavior, -7. no nonmarket interdepenences, -8. market is always clear.

III. Market Structure: 2. Market Imperfection -(1). Market Imperfection – Basic Concepts -ii. Categories of Market Imperfections: -1. Barriers Against New Competition – 3 -2. Consumer Loyalties May Exist – 2 -3. Differences in Access to Information, Including Secrecy – 4 -4. There May Be Large Uncertainties – 4 -8 -5. Risk Aversion – less competitive - 6 -6. Transactions Costs May Be Significant – 4 -8 -7. Consumers May Exhibit Irrational Behavior – 6 : :

III. Market Structure: 2. Market Imperfection -(2). Categories of Markets Ineffective Competition: Competition i. Monopoly ii. The Dominant Firm iii. Tight Oligopoly Effective Competition: Competition i. Loose Oligopoly ii. Monopolistic Competition iii. Pure Competition

III. Market Structure: 2. Market Imperfection -(3). Degrees and Concepts of Partial Competition -i. Ineffective Competition: -(i). Monopoly MR = MC Pm>Pc Qm<Qc Pm>MC Consumer surplus -i. X-Inefficiency -ii. Misallocation -iii. Redistribution -iv. Invention and Innovation -v. Freedom of choice -vi. Democracy -vii. Culture and Society

III. Market Structure: 2. Market Imperfection -(3). Degrees and Concepts of Partial Competition -i. Ineffective Competition: -(ii). The Dominant Firm: its power over the market is less than complete. A. Schumpeter’s Competitive Process: Transient Dominance? An process of dynamic disequilibrium: competition and progress occur together, i. e. , the cycle of creative destruction continues. ( the exact reverse of the neoclassical analysis of monopoly ) ↑ Passive Dominant Firms ? ? ? ( Be vulnerable enough? Easy entry? Max LRπ? ) B. * Dominance is usually ineffective competition. Persistent Dominance: i. Higher prices, ii. Price discrimination.

-(3). Degrees and Concepts of Partial Competition -i. Ineffective Competition: -(ii). Dominant Firm

III. Market Structure: 2. Market Imperfection -(3). Degrees and Concepts of Partial Competition -i. Ineffective Competition: -(iii). * Tight Oligopoly: ◎ The collusion is likely. main lines of the topic are as follows: i. Oligopoly is about fewness and interdependence ii. There is indeterminancy. iii. Strategy is required. iv. Oligopoly also means a wide range of outcomes. v. The oligopolists always have mixed, conflicting incentives between competing and colluding.

III. Market Structure: 2. Market Imperfection -(3). Degrees and Concepts of Partial Competition -i. Ineffective Competition: -(iii). * Tight Oligopoly: ◎ collusion is likely. Conditions facilitae coordination: i. High Concentration. iii. Familiarity over time. ii. Similarity of the Firms’ Conditions. ◎ Types of Coordination: i. Cartel. ii. Tacit Collusion.

III. Market Structure: 2. Market Imperfection -(3). Degrees and Concepts of Partial Competition -i. Ineffective Competition: Tight Oligopoly -(iii).

III. Market Structure: 2. Market Imperfection -(3). Degrees and Concepts of Partial Competition -ii. Effective Competition: -(i). Loose Oligopoly : collusion is not likely. -(ii). Monopolistic Competition Each firm has a slight degree of monopoly power, as follows: i. There is some product differentiation ii. There is free entry. iii. There is no interdependence among individual firms. -(iii). Pure Competition

III. Market Structure: 2. Market Imperfection -(3). Degrees and Concepts of Partial Competition