Intro to Imperfect Comp
Examples of these markets include Monopoly, Oligopoly, and Monopolistic Competition.
What are Imperfectly Competitive Markets?
A market structure characterized by a single seller and unique products
What is a Monopoly?
The practice of charging different prices to different buyers for the same good.
What is Price Discrimination?
A market structure with many sellers, free entry, but differentiated products.
What is Monopolistic Competition?
A market structure dominated by a few large firms who must consider the actions of their rivals.
What is an Oligopoly?
Unlike perfect competition, imperfectly competitive markets result in this type of economic outcome.
What is Inefficiency?
Because they limit output to raise prices, monopolies create a "triangle" of lost value on the graph known as this.
What is Deadweight Loss?
To practice this strategy effectively, a firm must have market power and be able to prevent resale
What are Conditions for Discrimination?
Like a monopoly, firms in this market structure have some control over price because their products are not identical.
What is Product Differentiation?
A tool used to analyze "simple games" and strategic behavior between competitors.
What is Game Theory?
Graphs of imperfect markets show that this curve lies below the Demand curve
What is the Marginal Revenue Curve?
Monopolies fail to produce at the quantity where Price equals Marginal Cost, leading to these types of outputs
What are Inefficient Outputs?
Perfect price discrimination eliminates this standard efficiency loss found in monopolies.
What is Deadweight Loss?
In the long run, firms in this market structure earn zero economic profit, similar to perfect competition.
What is Long-Run Equilibrium?
A situation in a game where a player's best choice is the same regardless of what the opponent does.
What is a Dominant Strategy?
In these markets, this mechanism cannot be relied on to coordinate the actions of all participants efficiently.
What are Prices?
The calculation of this area on a graph involves taking Total Revenue and subtracting Total Cost (TR-TC)
What is Calculating Profit (or Loss)?
Successful price discrimination transfers this specific area of value from buyers to the producer (increasing profit)
What is Consumer Surplus?
Graphs for this market show that the firm produces where Marginal Revenue equals Marginal Cost, but Price is greater than Marginal Cost
What is the Profit Maximizing Rule?
The specific equilibrium outcome in a game where no player has an incentive to deviate from their chosen strategy
What is a Nash Equilibrium?
The fundamental reason why imperfect markets lead to inefficient outputs compared to perfect competition
What is Market Power?
Calculating the specific areas of Consumer Surplus, Producer Surplus, and Deadweight Loss from a graph
What is Market Analysis (or Calculation)?
Calculating the change in profit (or loss) achieved by segmenting the market.
What is Calculating Surplus?
Calculating the area of sales not realized in this market using data from a table or graph
What is Calculating Deadweight Loss?
Calculating the specific incentive (payoff) sufficient to alter a player’s dominant strategy.
What is Calculating Incentives?