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S - 17 - Summary Market Structures PDF
S - 17 - Summary Market Structures PDF
OLIGOPOLY
SUMMARY OF MARKET
STRUCTURES
SPECIAL STUDY: MARKET
STRUCTURE OF A WHOLE
INDUSTRY
1/21/2011 Econ 11 -- Lecture #17 2
OLIGOPOLY
THERE ARE A FEW SELLERS.
EACH SELLER IS SIGNIFICANT RELATIVE
TO THE MARKET.
COMPETITION IS INTENSE (& RUINOUS)
o PRICE COMPETITION
o QUANTITY COMPETITION.
A COLLUSION AMONG SELLERS COULD
RESULT ( CARTEL)
o STEADY PRICE.
1/21/2011 Econ 11 -- Lecture #17 3
o STEADY MARKET SHARING.
1
OLIGOPOLY (KINKED
DEMAND
HYPOTHESIS):
Illustration
MR D
0
Q0 Quantity
MR D
0
Q0 Quantity
2
See Table 9-2.
SUMMARY: TYPES
OF MARKET
STRUCTURE
SUMMARY: NUMBER OF
SELLERS
Pure competition very plentiful
Monopolistic or differentiated
competition many
Oligopoly few
Monopoly only one
1/21/2011 Econ 11 -- Lecture #17 8
3
SUMMARY: DEGREE OF FIRMS
CONTROL OF EQUILIBRIUM
OUTCOME
Pure Competition No control
Monopolistic or Differentiated Competition
Very little control, although at times possible
Oligopoly Control depends on the intensity
of competition
Monopoly Complete control except in
regulated monopolies
1/21/2011 Econ 11 -- Lecture #17 10
SUMMARY: METHOD OF
MARKETING THE PRODUCT
Pure Competition Market determines
the price and the demand
Monopolistic or Differentiated
Competition Advertising; Service
differentiation
Oligopoly Advertising, Public relations
Monopoly Advertising, Public relations
1/21/2011 Econ 11 -- Lecture #17 11
4
1/21/2011 Econ 11 -- Lecture #17 13
TWIGGYS WRINKLES
ARE BRUSHED OUT SO
SHE LOOKS YOUNGER!
TRUTH IN ADVERTIZING
BRITISH GOVERNMENT
BANS THE
SHOWING OF THIS AD IN THE
UNITED KINGDOM
A RECENT CASE
MODEL FOR A
1/21/2011
SPECIALTY STORE
Econ 11 -- Lecture #17 15
5
SUMMARY: PREVALENCE IN
THE ECONOMY
SUMMARY: EXAMPLES
PURE COMPETITION
Basic commodities (staple agricultural
foods)
Public wet markets
Is the UP shopping center for various
student needs competitive?
Auction markets
International currency markets
Etc.
1/21/2011 Econ 11 -- Lecture #17 17
SUMMARY: EXAMPLES
MONOPOLISTIC COMPETITION
Restaurants
Grocery markets
Department store goods
Shopping malls in Metro Manila
Branded consumer items (detergents,
soap, toothpaste)
Personal Care products (medicines)
Etc.
1/21/2011 Econ 11 -- Lecture #17 18
6
SUMMARY: EXAMPLES
OLIGOPOLY
Banking (Metrobank, PNB, BPI, BDO,
CITIBANK)
Petron vs. Shell vs. Caltex (Others)
Coke vs Pepsi (vs Other softdrinks)
MacDonalds vs Jollibee (vs Other fast
foods)
Cellphone companies: Smart vs Globe vs
Sun
1/21/2011 Econ 11 -- Lecture #17 19
Cars Toyota, Nissan, GM, Hyundai
SUMMARY: EXAMPLES
MONOPOLY
SPECIAL STUDY:
MARKET
STRUCTURE OF A
WHOLE INDUSTRY
7
DIFFERENT STAGES OF ECONOMIC
ACTIVITY:
RICE, COCONUTS, VEGETABLES ETC.
AGRICULTURE GROWING &
HARVESTING
PRODUCT MARKETING
o WHOLESALE TO INDUSTRIAL USERS
o RETAIL TO END USERS (OF FRESH OUTPUT)
INDUSTRY INDUSTRIAL USE OF
PRODUCT
INDUSTRY PRODUCT MARKETING
1/21/2011 Econ 11 -- Lecture #17 22
8
MARKET STRUCTURE OF THE
COCONUT INDUSTRY
AGRICULTURE: MAIN PRODUCT THE
COCONUT FRUIT
o FOR THE MOST PART, MAINLY PURELY COMPETITIVE
Firms are small farms planted to coconuts
Individual farm owners have no control over the
product price
But there may be large plantations in which output
is collected by paid workers and the farm owner
has some control over price (can negotiate with nut
wholesale buyers or owns part of the industrial
part of the industry like copra making or coconut
oil milling)
1/21/2011 Econ 11 -- Lecture #17 25
9
MARKET STRUCTURE OF THE
COCONUT INDUSTRY
INTERNATIONAL TRADE COCONUT
OIL AND COPRA
o PRICES OF COPRA AND COCONUT OIL IN THE
INTERNATIONAL MARKET ARE DETERMINED
BY A COMPLEX OF MARKET FORCES.
o LARGE TRADING COMPANIES AND
INDUSTRIAL USEERS CAN CONTROL PART OF
THE PRICE OF COPRA FOR THEIR BENEFIT.
o INDUSTRIAL POLICIES IN USER COUNTRIES
CAN FAVOR COCONUT OIL MILLERS BY
IMPOSING TARIFF DUTIES ON COCONUT OIL
WHILE ALLOWING DUTY FREE IMPORTATION
1/21/2011 Econ 11 -- Lecture #17 28
OF COPRA.
Lecture 17
10