NS4960 Spring Term 2018 Approaches to OPEC Pricing

Spectrum of Competition

Aspects of Competition

Business Motives Firms can pursue a diverse set of motives. Profit Maximization Goal assumed by most theories – incremental revenues equal incremental costs Sales Volume Maximization Firm produces where total revenue equals total cost Market Share Common in oligopolies Survival Often found in highly competitive markets Shareholder value Equals remaining value of business after all debts paid Satisficing Attempting to take account number of objectives without maximizing any particular one

Monopoly: Cost and Revenue

Monopoly Optimization

Oligopoly Game Theory

Constant Sum Game: Minimize Losses

Problem of Potential Entry

Dominant Firm Model

Sales Maximization Model