MicroeconomicOLIGOPOLY文件材料.ppt

15;Barriers to Entry Either natural or legal barriers to entry can create oligopoly. Figure 15.1 shows two oligopoly situations. In part (a), there is a natural duopoly—a market with two firms.;In part (b), there is a natural oligopoly market with three firms. A legal oligopoly might arise even where the demand and costs leave room for a larger number of firms. ;Small Number of Firms Because an oligopoly market has only a few firms, they are interdependent and face a temptation to cooperate. Interdependence: With a small number of firms, each firm’s profit depends on every firm’s actions. Temptation to Cooperate: Firms in oligopoly face the temptation to form a cartel. A cartel is a group of firms acting together to limit output, raise price, and increase profit. Cartels are illegal.;Oligopoly Games;The Prisoners’ Dilemma In the prisoners’ dilemma game, two prisoners (Art and Bob) have been caught committing a petty crime. Rules The rules describe the setting of the game, the actions the players may take, and the consequences of those actions. Each is held in a separate cell and cannot communicate with each other. ;Oligopoly Games;Outcome If a player makes a rational choice in pursuit of his own best interest, he chooses the action that is best for him, given any action taken by the other player. If both players are rational and choose their actions in this way, the outcome is an equilibrium called Nash equilibrium—first proposed by John Nash. Finding the Nash Equilibrium The following slides show how to find the Nash equilibrium.;Bob’s view of the world;Bob’s view of the world;Art’s view of the world;Art’s view of the world;Equilibrium;Oligopoly Games;Oligopoly Games;An Oligopoly Price-Fixing Game A game like the prisoners’ dilemma is played in duopoly. A duopoly is a market in which there are only two producers that compete. Duopoly captures the essence of oligopoly. Cost and Demand Conditions Figure 15.2 on the next slide describes the cost and demand situation