1. Oligopolistic market: its specific traits and types.

2. The behavior of firms in the oligopolistic market. Price wars. Cartels.

3. Market monopolistic competition: its characteristic features and characteristics. Non-price competition.

1. Oligopolistic market belongs to the most common models of modern market structure. It occurs when the aggregate demand of many buyers is met by a small number of large producers. Moreover, each of them accounts for such a large part of the market. of this product that when deciding whether to set a price or a sales volume, the manufacturer is forced to take into account the possible reaction of competitors. Entry of new firms is difficult or impossible. Most widespread oligopoly gained in modern high-tech industries.

The characteristic features of the oligopolistic market are:

the small number of firms in the industry (usually from two to twenty) and a high degree of concentration of production; the generally recognized interdependence of oligopolistic firms; the product produced by an oligopolist company can be either standard (steel, aluminum) or differentiated (cars, cigarettes); entry into the industry is difficult or limited by barriers (the same as in the monopoly market), but economies of scale are considered the most significant.

Types of oligopoly. Taking into account the degree of coverage of the industry, there are: "Tough oligopoly"(when the market is dominated by 2-4 firms) and "Blurred" or "Soft oligopoly"(When 70-80% of the market is controlled by only 6-10 firms).

If oligopolistic firms produce standardized products, there is pure oligopoly, and in the case of the production of various products, the same functional purpose – differentiated oligopoly.

By the nature of the preliminary agreement, they are distinguished: oligopoly with consistent (cooperative) behavior and oligopoly with inconsistent (non-cooperative) behavior on the market, but based on the legitimacy of existence - legal oligopoly and an oligopoly based on collusion.

2. The complexity of the analysis of the behavior of oligopolistic firms is due to two main reasons: 1) the presence and variety of forms of manifestation of the general relationship between firms and 2) the inability to foresee the reaction of competitors. Therefore, the behavior of oligopolists in the market is like the behavior of armies in war. Firms are rivals, and profit is the trophy. Their weapons are price controls, advertising, and output.

The competitive struggle of oligopolistic firms is manifested in different forms: from brutal price wars to collusive cooperation. "Price War"- This is a deliberate rivalry, cyclical, sequential reduction of the existing price level in order to "squeeze" a competitor out of the market. The war continues until the price falls to the level of the average total cost, i.e. until the economic profit disappears. Unfortunately for buyers, price wars are usually short-lived.

After the lapse of time, in order to reduce mutual competition and avoid loss of profits, oligopolistic firms switch to active cooperation in the form of collusion. Collusion- an explicit, secret or tacit agreement regarding the price and market share of each oligopolistic firm in the market. Conditions for the conspiracy: 1) it is necessary that the industry has a small number of firms producing standardized products; 2) non-price factors competition was weakly involved; 3) the barriers to entry for new firms were high.

In the event of collusion in an oligopolistic market, cartel- a group of firms acting together and agreeing on decisions about the establishment of fixed prices and volumes of output, as if they were a single monopoly. In case of strict observance of the cartel agreement, it acts as a pure monopoly.

The peculiarities of the functioning of the oligopolistic industry made it impossible to create a unified model of behavior for oligopolistic firms. Therefore, in theory developed a number of formal models explaining their market behavior. Among them: Cournot models; Bertrand; Stackelberg; a “broken” (bending) demand curve model; cost-plus and behind-the-leader pricing models; "Prisoner's dilemma", etc.

3. Monopolistic competition- a model of an imperfectly competitive market, in which a fairly large number of firms produce goods - close substitutes. This model of a modern market structure has become widespread in business areas that do not require significant investment.

The characteristic features of the market of monopolistic competition(RMK) are: a large number of small firms; the products offered on the market, although they belong to the same product group, are rather differentiated; some, limited control over the price of products; non-price competition; relatively free entry and exit from the industry.

On the one hand, the market for monopolistic competition is similar to the market perfect competition, since it is assumed that there are many small selling firms and a large number of buyers, there are no barriers to entry - exit, awareness of market conditions is complete, there is no possibility of collusion.

On the other hand, there are certain features of the monopolistic market: heterogeneous differentiated products, the ability to control the price of their products, albeit within narrow limits. Each manufacturer of a certain brand of goods in the market of monopoly competition acts as a monopolist and has a decreasing demand curve. But monopoly power, insignificant in size, does not allow the firm to significantly influence the market situation.

Thus, at RCC there is a situation of “mixing” of competition and monopoly: significant development competition is coupled with little monopoly power over the market. Such conditions force a monopoly competitive profit-maximizing firm to resort first to non-price and then to price competition.

Non-price competition plays a leading role in the competitive struggle of firms in the market of monopolistic competition, being a source of increasing their profitability.

Non-price competition methods can be: 1) associated with improving the product (improving quality) and improving the conditions of its sale; 2) focused on advertising and promotional activities.

The product can be improved without a fundamental change in its consumer properties (packaging, design, method of sale, services and conditions, placement and availability). But in the long run, firms are guided by the development of new models that embody new advances in science and technology. Therefore, in contrast to monopoly, monopolistic competition has a direct interest of firms in the implementation of scientific and technical innovations.

Product differentiation- real or perceived differences between similar products from different firms.

If differentiation adjusts the product to consumer demand, then advertising, on the contrary, adjusts consumer tastes to the product. Advertising is one of the most effective methods stimulating demand. With its help, the firm can further tie the consumer to its own product, increase its market share and reduce the elasticity of demand for its products.

Thanks to non-price competition, the company at RCC has an opportunity to control not only the supply, but also the demand for its products. The monopoly competitor firm has a negative slope of the demand curve, and the volume of output is set based on the rule of maximizing profits (minimizing losses) at the level Q *: MS = MR< P. However, when deciding on the price level, he acts like a monopolist: the price is set at the highest possible level, that is, at the level of the demand price for the product.

According to economists, a firm that is trying to maximize profits on RMK must constantly maneuver the price-to-product ratio, change in output, improve the product itself, and conduct promotional activities.

Questions for self-diagnosis knowledge

1. List the characteristics of oligopoly markets and monopolistic competition.

2. Analyze the basic shapes competitive struggle and theoretical models of oligopolistic pricing.

3. Explain the essence of non-price competition, its types and significance for oligopoly markets and monopolistic competition.

Examples of problem solving

Objective 1. Suppose the Cournot duopolists have created a cartel that faces the market demand curve: P = 10 - Q. The product is standardized. The marginal cost of the cartel is MC = 2. Determine the equilibrium volume of output and the price of the cartel's products.

Solution to Problem 1. All other things being equal, the cartel would produce products guided by the profit maximization rule MC = MR. The marginal cost of the cartel is known, and the marginal revenue (MR) is found using the derivative of gross revenue (TR). TR = (10-Q) × Q = 10Q - Q 2. Where MR = TR / (Q) = 10 - 2Q.

If MR = MC, then 10 - 2Q = 2; 8 = 2 Q; Q = 4.

Then, substituting the value of Q into P = 10-Q, we get P = 6.

In a market economy, phenomena such as monopolistic competition and oligopoly can be observed. What are they?

Monopolistic Competition Facts

Monopolistic competition- this is the state of the market (or its individual industries), in which it is sufficient a large number of firms produce similar products and can use the opportunity to set prices that are comfortable for themselves. As a rule, this is permissible due to the fact that a fashion for specific products from a certain brand appears in the consumer community - and they begin to be bought more actively than those produced by competitors. But a significant difference is also possible between the quality of products from competing firms. In addition, the location of the supplier often influences the choice of buyers.

A brand that produces fashionable or particularly high-quality products can significantly inflate prices relative to the market average - but only as long as they satisfy customers in terms of combination with quality and other factors influencing the choice of the appropriate products. Or until a direct competitor appears on the market, ready to supply the same goods in quality, but cheaper, and also able to promote their products and make them fashionable.

In some cases, firms that are present in the market of monopolistic competition are able to make decisions about reducing prices - for example, in order to increase their own share in a segment. But in this case, too much enthusiasm for cheapening products can lead to the fact that people will cease to perceive it as a promoted, fashionable brand and begin to pay attention to the products of just the same competing firms.

Monopolistic competition is noticeably different from the so-called perfect one - in which brands have practically no opportunity to set prices that are convenient for themselves due to the fact that other manufacturers offer their consumers goods of exactly the same quality and level of promotion. But monopoly competition is much closer to perfect than, in particular, to oligopoly. What are its features - we will now study.

Oligopoly facts

At oligopolies the main share of the market (or some of its segments) is divided among themselves by a relatively small number of competing firms. This economic condition is most often due to the difficulty of new players entering the relevant industry, due to administrative and other barriers.

Relationships between competing firms under an oligopoly are less built on the basis of market laws of supply and demand, to a greater extent - on the basis of unofficial communications, “behind-the-scenes games”, private agreements between owners and top managers of businesses. The fact is that any change by the firm of the price in the oligopoly market (both up and down) can significantly affect the state of affairs in the business of competitors. Therefore, rival companies as a whole tend to agree among themselves on pricing policy, access to suppliers and sales markets. But at the same time, they do not cease to be competitors - and therefore the market shares of individual companies can change over time.

It is often the firm that is the strongest player in the behind-the-scenes as well as in the art of negotiation that becomes the market leader. Ultimately, it is able to get the opportunity to establish monopoly prices. Of course, those businesses that have offered the market the most competitive development model based on real growth in the quality of goods and management efficiency can also become leaders.

Comparison

The main difference between the monopolistic competition market and the oligopoly market is the degree of openness of the market sector. In the first case, there are usually no significant barriers to entry for new players, and as a result, a large number of businesses begin to compete with each other. Under an oligopoly, the market or its segments are not open to everyone, and therefore few companies compete with each other.

In monopolistic competition, suppliers, in turn, are more free in pricing. They can raise the selling prices for products until consumers stop buying them due to too high costs in relation to the quality of the goods, brand promotion and other factors that determine the choice of the product. Or - to reduce prices in order to consolidate market share.

Under an oligopoly, a unilateral increase or decrease in selling prices without due coordination with competitors is usually problematic - unless the company offers a noticeably more effective management model than other market players and produces much better quality goods for which it is legitimate to raise prices.

Having determined what is the difference between the market of monopolistic competition and the market of oligopoly, we will fix the criteria we have identified in the table.

The market economy is complex and dynamic system, with many connections between sellers, buyers and other participants business relationship... Therefore, markets, by definition, cannot be homogeneous. They differ in a number of parameters: the number and size of firms operating in the market, the degree of their influence on the price, the type of goods offered, and much more. These characteristics determine types of market structures or otherwise market patterns. Today it is customary to distinguish four main types of market structures: pure or perfect competition, monopolistic competition, oligopoly and pure (absolute) monopoly. Let's consider them in more detail.

Concept and types of market structures

Market structure- a combination of characteristic industry attributes of market organization. Each type of market structure has a number of characteristic features that affect how the price level is formed, how sellers interact in the market, etc. In addition, the types of market structures have varying degrees of competition.

Key characteristics of types of market structures:

• the number of selling firms in the industry;
• size of firms;
• the number of buyers in the industry;
• type of goods;
• barriers to entry into the industry;
• availability of market information (price level, demand);
• the ability of an individual firm to influence the market price.

The most important characteristic of the type of market structure is level of competition, that is, the ability of a single selling company to influence the general market conditions. The more competitive the market, the lower the opportunity. Competition itself can be both price (change in price) and non-price (change in the quality of goods, design, service, advertising).

Can be distinguished 4 main types of market structures or market models, which are presented below in descending order of the level of competition:

• perfect (pure) competition;
• monopolistic competition;
• oligopoly;
• pure (absolute) monopoly.

A table with a comparative analysis of the main types of market structure is shown below.

Table of the main types of market structures

Perfect (pure, free) competition

A market of perfect competition (English "Perfect competition") - characterized by the presence of many sellers offering a homogeneous product, with free pricing.

That is, there are many companies on the market offering homogeneous products, and each selling company, by itself, cannot influence the market price of these products.

In practice, and even on the scale of the entire national economy, perfect competition is extremely rare. In the XIX century. she was typical for developed countries, in our time, the markets of perfect competition can be attributed only (and then with a reservation) agricultural markets, stock exchanges or the international currency market (Forex). In such markets, a fairly homogeneous product (currency, stocks, bonds, grain) is sold and bought, and there are a lot of sellers.

Features or conditions of perfect competition:

• number of sales firms in the industry: large;
• the size of the selling firms: small;
• product: uniform, standard;
• price control: none;
• barriers to entry into the industry: practically nonexistent;
• methods of competition: only non-price competition.

Monopolistic competition

Market of monopolistic competition (English "Monopolistic competition") - characterized by a large number of sellers offering a varied (differentiated) product.

In conditions of monopolistic competition, entry to the market is fairly free, there are barriers, but they are relatively easy to overcome. For example, to enter the market, a firm may need to obtain special license, patent, etc. The control of the selling firms over the firms is limited. The demand for goods is highly elastic.

An example of monopolistic competition is the cosmetics market. For example, if consumers prefer Avon cosmetic products, they are willing to pay more for it than for similar cosmetics from other companies. But if the difference in price is too large, consumers will still switch to cheaper counterparts, such as Oriflame.

Monopolistic competition includes the markets of the food and light industries, the market for medicines, clothing, footwear, and perfumery. Products in such markets are differentiated - the same product (for example, a multicooker) has different sellers(manufacturers) can have many differences. Differences can manifest themselves not only in quality (reliability, design, number of functions, etc.), but also in service: availability of warranty repairs, free shipping, technical support, payment by installments.

Features or features of monopolistic competition:

• number of sellers in the industry: large;
• firm size: small or medium;
• number of buyers: large;
• product: differentiated;
• price control: limited;
• access to market information: free;
• barriers to entry into the industry: low;
• methods of competition: mainly non-price competition, and limited price competition.

Oligopoly

Oligopoly market (English "Oligopoly") - characterized by the presence on the market of a small number of large sellers, whose goods can be either homogeneous or differentiated.

Entering an oligopolistic market is difficult, and barriers to entry are very high. The control of individual companies over prices is limited. Examples of oligopoly are the car market, markets cellular communication, household appliances, metals.

The peculiarity of the oligopoly is that the decisions of companies on the prices of goods and the volume of its supply are interdependent. The market situation strongly depends on how companies react when the price of products is changed by one of the market participants. Possible two kinds of reaction: 1) follow-up reaction- other oligopolists agree with the new price and set prices for their goods at the same level (follow the initiator of the price change); 2) reaction of ignoring- other oligopolists ignore the price change by the initiating firm and maintain the same price level for their products. Thus, the oligopoly market is characterized by a broken demand curve.

Features or oligopoly terms:

• number of sellers in the industry: small;
• firm size: large;
• number of buyers: large;
• product: homogeneous or differentiated;
• price control: significant;
• access to market information: difficult;
• barriers to entry into the industry: high;
• methods of competition: non-price competition, very limited price.

Pure (absolute) monopoly

Market pure monopoly (English "Monopoly") - is characterized by the presence on the market of a single seller of a unique (having no close substitutes) product.

Absolute or pure monopoly is the exact opposite of perfect competition. Monopoly is the market for one seller. There is no competition. The monopolist has full market power: it sets and controls prices, decides how much of a product to offer to the market. Under a monopoly, the industry is essentially represented by just one firm. Market entry barriers (both artificial and natural) are almost insurmountable.

The legislation of many countries (including Russia) fights against monopolistic activities and unfair competition (collusion between firms in setting prices).

Pure monopoly, especially on a national scale, is a very, very rare phenomenon. Examples include small settlements(villages, townships, small towns), where there is only one store, one owner of public transport, one Railway, one airport. Or natural monopoly.

Special varieties or types of monopoly:

• natural monopoly- a product in an industry can be produced by one firm at a lower cost than if many firms were engaged in its production (example: utilities);
• monopsony- the only buyer on the market (monopoly on the demand side);
• bilateral monopoly- one seller, one buyer;
• duopoly- there are two independent sellers in the industry (such a market model was first proposed by A.O. Cournot).

Features or monopoly terms:

• number of sellers in the industry: one (or two if it comes about duopoly);
• firm size: various (usually large);
• number of buyers: different (there can be many or a single buyer in the case of a bilateral monopoly);
• product: unique (has no substitutes);
• price control: complete;
• access to market information: blocked;
• barriers to entry into the industry: almost insurmountable;
• methods of competition: absent as unnecessary (the only thing is that a company can work on quality to maintain its image).

Galyautdinov R.R.

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Currently represents complex system, in which such concepts as perfect competition, monopolistic competition, oligopoly, monopoly are manipulated. The last two are opposite, representing edge cases. And more realistic models at the moment are monopoly, oligopoly, monopolistic competition. Each of these phenomena should be considered separately.

Monopoly

In this case, the numerical distribution of participants on the supply side and the simplicity is such that there are many buyers per seller. The concept of an industry and one firm is completely the same. Market access is completely blocked for new companies. The seller sets a fixed price for his goods and services. There is almost no competition, due to which advertising is practically not used. In this case, monopoly and oligopoly have very little in common. Other differences should be considered.

Oligopoly

The characteristic features of this market structure are as follows. Participants on the supply and demand side in this case are distributed in a very specific way: we are talking about several sellers and many buyers. Firms have significant market shares. Market access for new organizations is noticeably difficult. Sellers are mutually dependent on each other, therefore, prices are set in accordance with certain rules. Competition in this case is noticeable rather strong, which is reflected in high quality and the amount of advertising. And this is the noticeable difference that characterizes oligopoly and monopoly.

Monopolistic competition

This market model differs from the rest in every way. Market participants in such a situation are distributed as follows: many sellers offer their goods or services to many consumers, that is, small market shares are assigned to individual firms. For new companies, market access is completely open, but existing consumer preferences can become an obstacle to introducing something new. Sellers are focused on individuality of products, which allows them to make wide maneuvers with prices. If we talk about competition, then it is strongest here, due to which advertising is presented in large volumes, but sellers compete on prices, providing more attractive conditions for consumers.

It can be seen that monopoly and oligopoly are not such different structures, because the latter seeks to be reborn into the former. And monopoly competition is directed towards becoming perfect competition. Now you can consider in more detail such concepts as competition, pure competition, monopoly, oligopoly. It's worth starting with extreme manifestations.

The essence of oligopoly

Oligopoly refers to a market structure in which the demand of the majority of buyers in an industry is met by a small number of producers. There is a concept that is completely opposite to oligopoly - oligopsony. It means that a small number of buyers deal with a large number of manufacturers and sellers.

The effectiveness of oligopoly

If we talk about whether an oligopoly is an effective market structure, then there are two points of view on this topic that speak about its economic consequences.

The traditional view is that its actions are analogous to a monopoly, which leads to results similar to a pure monopoly. At the same time, under the conditions of an oligopoly, there is an outward appearance of competition between a number of independent firms. The Schumpeter-Galbraith point of view suggests that oligopoly is the engine of scientific and technological progress, thanks to which improved products appear at lower prices and high level production and employment than in a situation where the nature of the organization of the industry is different.

Specific traits

The following options can be called the characteristic features of an oligopoly:

• A small number of firms are represented in the industry. Most often, with such a market structure, there are from two to ten large organizations that carry out more than half of all sales of a particular product.
• Products on the market can be differentiated or standardized. If we talk about the latter, then such examples can be the markets of lead and aluminum. Oligopolistic markets with goods from the first category are the markets for cigarettes, beer, cars, chewing gum and others.
• If we consider oligopoly and monopoly, then it is worth noting that for new firms, entry into the market is either significantly difficult, or it is completely impossible. Most often, there is a certain barrier to entry into the market, which is similar to the one that corresponds to the entry into the market of a pure monopoly: all key raw materials are under control, each representative has patents, economies of scale and other equally important points.
• Firms-oligopolists are highly dependent on each other, so their behavior in the market is built in accordance with a certain strategy. Under the strategic behavior of a firm, one can understand that when its prices, quantity or quality of goods change, the actions are necessarily calculated so as to take into account all the responses of competitors. Since there can be many answers, one cannot speak of the existence of a unified theory of oligopoly. If we analyze such phenomena as monopoly and oligopoly, then it will not be superfluous to apply game theory.

Market concentration

There is a Herfindahl index designed to measure market concentration. It is calculated as follows: H = S1 + S2 + S3 +…. Sn, where S1 represents the firm's market share that maximizes the supply of products; S2 represents the next largest supplier, and so on. Changes in the index can be in the range from 100 to 10,000. In the first case, we are talking about a pure monopoly. In the United States, a market with a Herfindahl index of 1000 or below is commonly referred to as relatively unconcentrated. If H = 1800 or more, then we can talk about a high concentration of the market.

How does the firm behave?

For a company operating in an oligopoly, there is a certain behavior strategy:

Non-cooperative interaction. Despite the fact that firms compete with each other, their policy of behavior in the market is independent. There are several models that reflect the main variants of the noncooperative strategy: Cournot, Forheimer, Bertrand, and Stackelberg. The Cournot model is considered to be classic for a duopoly, that is, a market structure in which two sellers are the only producers of a standardized product that has no close substitutes or analogues.

Oligopoly theory continues its analysis imperfect competition... An oligopoly is an intermediate market structure, located between the poles of pure monopoly and perfect competition. The theory of oligopoly supplements the theory of the firm with elements of strategic behavior.

Oligopoly: characteristics of the market structure. The interdependence of the economic behavior of oligopolistic firms. Strategic behavior of an oligopolist firm. Lack of a unified pricing model in the oligopolistic market. Pricing models: Cournot duopoly, broken demand curve, cartel agreements, price leadership, cost-plus pricing. Game theory is a model of non-cooperative play. Dominant strategy. Optimum in the Prisoners' Dilemma Model; Nash equilibrium.

Antimonopoly policy of the state. Russian antimonopoly legislation.

LECTURE PLAN

1. Oligopoly: concept, signs and distribution. Strategic behavior. Oligopolistic equilibrium.

2. Models of price behavior of opigopolist firms.

Z. Antitrust Policy state.

SEMINAR PLAN

1. The structure of the oligopolistic market.

2. Determination of the output volume and price by an oligopolist (broken line
demand curve, Cournot duopoly, cartel agreement, price leadership), game theory model.

3. Antimonopoly regulation and antimonopoly legislation.

Basic concepts

Oligopoly- the structure of the market in which the offer is presented by several sellers, taking into account the behavior of competitors in their plans.

Duopoly- such a structure of an oligopolistic market in which the offer is presented by two sellers. The product is standardized; demand is generated by many independent buyers. The first model to describe the behavior of a duopoly was Cournot's model. It assumes that each duopolist firm knows the market demand function, and each firm makes a decision about the volume of production based on the assumption of the competitor's output, which is reflected in the response curves.

Reaction curve- functional dependence of the output of one firm on the volume of production of another at a given level of industry demand at certain marginal costs. Reaction curves are described by functions of the form: q 1 = f (q 2) and q 2 = g(q 1), where q 1 and q 2 are the production volumes of the first and second firms, and q 1 + q 2 = Q, where Q is the volume of industry output. The solution of the system on two equations of the reaction curves allows one to obtain the value of the equilibrium production volumes of both firms, the industry output and the market price.

Model broken demand curve explains the stability of prices in the oligopolistic market. Under equilibrium conditions, the oligopolistic firm will have no incentive to change the price, since at this point a kink in the demand curve for the products of this firm is formed. When the price is set above the equilibrium one, the demand curve turns out to be very elastic (flat), i.e., with a relatively small increase in price, the volume of sales will decrease to a greater extent (this firm will be squeezed out of the market by other firms, which will not increase the price after it). When trying to reduce the price, the firm will face a steep segment of demand characterized by low elasticity, since the rest of the firms in their pricing policy will follow this one, and the volume of sales will increase insignificantly. The marginal revenue graph corresponding to the broken demand curve will have a gap. As long as the marginal cost curve in its changes does not go beyond the boundaries of this gap, the price can remain unchanged.

Price Leadership- such a model of oligopoly, in which one firm occupies a leading position in the industry (due to its possession of some advantage - in costs, production scale due to ownership of an irreplaceable resource, etc.), and the rest of the firms are forced to follow in the pricing process behind the leader. Thus, the subjects of the model are price leader and followers or competitive environment. The analytical model of price leadership is based on the premise that the demand for the leader's products is residual, i.e. is formed as the difference between the value of industry demand and the supply of followers: q L = Q d neg. -q s last Based on the obtained demand function for the leader's products, the leader's marginal reason function will fall out. From the equality of the leader's marginal income and the leader's marginal costs, the leader's production volume and the price corresponding to the demand function for the leader's products are calculated: Р L = f (q L). The volume of products supplied to the market by followers is derived on the basis of the followers supply function: q s last. = g (P L).

Cartel- a model of a cooperative oligopoly. The group of firms makes coordinated decisions on the volume of production in order to control prices. Thus, firms from individual producers turn into a single monopoly, the production of which is carried out at several enterprises. . In the event that the merging firms are the same (the functions of their total costs are identical), the total and cartel costs (TC K) become the sum of the costs of individual enterprises (TC i), the volume of production of each of which represents a certain share of the market demand for the products of the entire monopoly: TS K= ∑TS i, where TC i= f (q i) and q i = Q / N, where Q - the value of market demand, and N is the number of firms that have united in a cartel. If the merged firms are different, then the monopoly distributes output between individual enterprises, guided by the principle of equality of marginal production costs at the corresponding plant and marginal revenue, the amount of which is the same for all: MC i = MR.

TESTS

1. Which of the following does not represent a barrier to the entry of new competitors into a certain market:

1) import quotas;

2) patent legislation;

3) antitrust legislation;

4) standards for protection the environment that are required to comply with all firms operating in the economy;

5) minimum size initial capital

2.The difference between an oligopoly and perfect competition is:

1) the presence of significant barriers to entry into the industry;

2) product differentiation;

3) the interconnectedness of decisions made by individual firms;

4) 1) and 3) are true.

5) all answers are correct.

3. The key characteristic of an oligopoly is:

1) the presence of redundant production facilities;

2) the interdependence of firms;

3 ) the presence of sustainable economic profit;

4) product differentiation;

5) the price is higher than the limit income.

4. The name Cournot is associated with:

1) with a model of a broken demand curve;

2) the use of game theory when considering the behavior of the oligopoly;

3) a theory based on the oligolist's assumption that the competitor's output is invariable in response to a change in his own output;

4) a theory based on the assumption of an oligopolist about the invariability of the price of a competitor's products in response to a change in the price of his own products;

5) a price leadership model.

5. In accordance with the Cournot model, firms with equal and constant marginal costs:

1) divide the market equally;

2) reduce the price to the level of marginal costs;

3) form a cartel, reducing their total output at the pre-monopoly level;

4) increase production to the level of perfect competition;

5) 1) and 3) are true.

6. The broken demand curve model illustrates and explains:

1) the behavior of the duopoly;

2) the behavior of the firm in a monopolistic competition;

3) cartel pricing;

4) the behavior of an oligopoly that is not inclined to cooperate;

5) the behavior of any firm sanctioning under conditions of imperfect competition.

7. The broken demand curve model assumes that oligopolists:

1) when faced with confident changes in the margins; costs, leave the price unchanged, but change the volume of production;

2) keep the price and production volume unchanged with moderate changes in demand;

3) with moderate changes in marginal costs, they do not change the price and volume of production;

4) with moderate changes in demand, they change the volume of production, leaving the price unchanged;

5) 2) and 3) are true.

Questions 8-10 refer to Schedule 9.1.

0 D E Quantity

Chart 9.1

8. The depicted broken demand curve shows that the firm expects that:

1) it will sell relatively little (CE site) while its competitors will sell relatively large (AC site);

2) competitors will follow her when prices drop and will not -

with growth;

3) competitors will never initiate price changes;

4) all answers are correct;

5) 2) and 3) are true.

9. Curve of marginal revenue corresponding to this broken demand curve:

1) leaves the point A, halves a segment Sun and ends

at point E;

2) goes out of point A and crosses the horizontal axis in the middle of the segment OE;

3) passes above the horizontal axis for all production volumes in the segment 0D;

4) goes out of the point A and ends at point O;

5) there is not enough information.

10. You can expect, then, from this firm:

1) the volume of production will be different OD;

2) the price will settle at the OB level;

3) the curve of marginal revenue will have a break;

4) all answers are correct:

5) there is no correct answer.

PROBLEMS WITH SOLUTIONS

The industry demand for rolled steel is presented in the form Q = 200 -Р. This market was divided between two firms. The marginal cost is first described by the function: MS 1 = 2 q 1, and the second MS 2 = q 2+ 20. Print the reaction curves of these firms, determine the volume of production of each of them and the market price.

Solution:

We derive the inverse demand function - P = 200 - Q. Since all industry demand is met by two firms, one can replace in the equation Q = q 1 + q 2... We get: P = 2 00 -q 1 - q 2.

Now you can derive the equations for total and marginal revenue for each firm.

TR 1 = Pq 1 = (200 - q 1 - q 2) q 1 = 200 q 1 - q 1 2 - q 1 q 2;

MR 1 = (TR 1) `q 1 = 200-2 q 1 - q 2.

Likewise for the second firm. MR 2 = (TR 2) `q 2 = 200-2 q 2 - q 1.

The maximum profit is achieved provided that MR = MC .

For the first company: MR 1 = MC 1, those. 200-2 q 1 - q 2 = 2 q 1. From this equality, the equation of the reaction curve for the first firm is derived: 4q 1 = 200 - q 2; q 1 = 50-0.25 q 2.

Similarly, we obtain the reaction curve for the second company: q 2 = 60-0.33 q 1.

Having solved the system of two equations with two unknowns (q 1 and q 2), we have: q 1 = 38.15; q g = 47,41; P = 114,44.

Answer: 1) q 1 = 50-0.25 q 2; q 2 = 60-0.33 q 1; 2) q 1 = 38.15; q g = 47,41; 3)P = 114,44.

Let the industry demand for standard quality computers be described by the function: P = 100-2Q. The marginal costs of the largest firm in the industry are presented in the form: MC L = 0.5q L + 6, and the offer of all other computer manufacturers can be described as follows: q s last. = 0.5Р +4. Determine the leader's production volume, the industry as a whole, and the market price of the computer.

Solution:

1. Let's define the demand function for the products of the leading firm. To do this, we first obtain the direct function of Industry demand.

Q = 50-0.5P. With this in mind, q L = Q d neg. - q s last = 50-0.5P-0.5P-4 = 46 - P or P = 46 - q L. Hence the leader's marginal revenue: MR = 46 -2 q L.

2.Let's determine the leader's production volume using the principles of profit maximization: МR L = MC L 46 - 2 q L = 0.5q L + 6. Hence, 2.5 q L = 40; q L = 16.

3. To obtain the market yen, we substitute the value of its output into the demand function for the leader's products: P = 46 -q L = 46- 16 = 30. The volume of production in the industry is: Q neg = 50-0.5 P = 50-15 = 35.

Answer: 1) q L = 16; 2) Q neg = 35; 3) P = 30.

The industry demand for tires is expressed by the equation: Q = 100- R. All four firms producing this good have united into a cartel. The total costs of each of them are described by the equation TС i = q i 2 - 10q i... Determine the individual firm's production and market yen.

Solution:

Cartel profit maximization condition: MR K = MC K.

1. To obtain the cartel marginal revenue function, we express the inverse demand function. It will look like P - 100-Q. Knowing that the marginal revenue of a monopoly has a slope twice as large, the demand function for its products, we have MR K = 100 - 2Q.

2. Now let's define the marginal costs of the cartel:
Sectoral demand Q is provided by the production of four identical firms: Q = 4 q i... From here q i= 0.25Q. The total cost of a cartel is the sum of the costs of its member firms: TC K = ATC i = 4 q i 2 - 40q i= 4 (0.25Q) 2 -40 (0.25Q) = 0.25Q 2 - 10. Hence the marginal costs of the cartel MS K = - 0.5Q-10.

3. MR K = MS K; 0.5Q - ​​10 = 100 - 2Q; hence the monopoly
cartel output Q = 44, individual firm's output q i = 11.
Market price P = 100-Q = 56.

Answer: q i= 11; P = 56.

TASKS

The study of the market for matches in the conditions of the Cournot duopoly made it possible to determine the reaction functions of each company: y 1 = 100 - 2y 2; y 2 = 100 - 2 at 1, where at 1 and at 2- production volumes of the respective firms. Graph the response functions of firms and calculate the output of each firm

Market demand conditions are expressed by the equation Q d = 100 - 2P. There are two firms operating on the market with equal marginal costs ( MS 1= MC 2 = 20). Find the parameters of market equilibrium in the market under the Cournot duopoly.

Two firms produce copper wire at costs, the functional dependence of which on production volumes is expressed, respectively, by the equations TC 1 = 0.5q 1 2 + 2 q 1 and TC 2 = 0.5q 2 2 + 4 q 2. Demand conditions are represented by the equation Q d = 50-0.5R. Define:

1) equations of reaction curves for each firm;

2) the volume of production of each firm:

3) market price;

Market demand in the oligopolistic market is expressed by the equation Q d = 300-2P. Total costs the largest firms in the industry are presented in the form: TS L = Q 2 - 4Q + 6, and the offer of all other firms: P last. = 100 + 2Q.

Define (up to the second decimal place):

1) the sales volume of the largest firm;

2) the equilibrium price in the given market;

3) the total sales of other firms in the industry.

On the market there are a firm - a price leader and a number of small firms that make up the competitive environment. The dominant firm's cost function is: TC L = 0.5q L 2 -2.5 q L +18. Market demand is given by the function P - 45 - Q d. Firms in a competitive environment can offer the following number of products:: q last. = P L -10.

Define:

1) the volume of production of the dominant firm;

2) the price it will set on the market;

3) the volume of production of the entire industry.

Market demand for audit services is defined as Q neg. = 1000 - 2P per month. The demand is met by the dominant firm (the leader) and ten outsider firms. Costs of the TS leader L = 100-50q + q 2. Costs of a typical TS outsider = 2.5 q 2. Determine the profit of the dominant firm and one of the outsiders.

There are five companies in the city where you can rent a car. The total costs of each of them are presented in the form. TC L, = 0.5q 2. Market demand for this service is described by the equation Q = 120 - 2P. If all these firms merge into a cartel, what price will be set and to what extent will the individual firm's quota be determined?

Answers.

Tests: 1. 3); 2. 4); 1 2); 4. 3), 5. 1); 6. 4); 7. 3); 8. 2); 9, 3);10. 4)

Tasks

1.y 1 = y 2 = 33.3.

2.q 1 = q 2 = 20; P = 30

3.1) q 1 = 19.6-0.4 q 2, q 2 = 19.2-0.4 q 1; 2) q 1 = 14.2; q 2 = 13.5;

P = 44.6; 4) l HH = 5002.

4.1) Q L = 51.43; 2) P L = 119.43; 3) Q last = 9.71

5.1) Q L = 15.2; 2) P L = 20; 3) Q neg. = 25

6. P L = 17900; Pi = 4840.

7. P = 35; q i = 10.

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