Lecture 20 Monopoly. Market structure Market structures: u A monopolized market - a single seller. u Monopoly affects the price (has market power) u Takes.

Slides:

Advertisements

Similar presentations

Price discrimination Definition: charging different prices for the same product to different consumers Examples –senior citizen discounts –airfares: business.

Advertisements

Price Discrimination A monopoly engages in price discrimination if it is able to sell otherwise identical units of output at different prices Whether a.

Monopoly Standard Profit Maximization is max r(y)-c(y). With Monopoly this is Max p(y)y-c(y) (the difference to competition is price now depends upon output).

Chapter Twenty-Four Monopoly. Pure Monopoly u A monopolized market has a single seller. u The monopolist’s demand curve is the (downward sloping) market.

Part 7 Monopoly Many markets are dominated by a single seller with market power The economic model of “pure monopoly” deals with an idealized case of a.

Monopoly Outline: Outline: Characteristics of a monopoly Characteristics of a monopoly Why monopolies arise? Why monopolies arise? Production and pricing.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly u A monopoly is the sole seller of its product.  its product does not.

What’s the difference between monopoly and competition? Monopoly: one firm selling a product Competition: many firms selling same product Other models.

Monopoly Standard Profit Maximization is max r(y)-c(y). With Monopoly this is Max p(y)y-c(y) (the difference to competition is price now depends upon output).

Monopoly. Monopoly: Why? u Natural monopoly (increasing returns to scale), e.g. (parts of) utility companies? u Artificial monopoly –a patent; e.g. a.

Possible Barriers to Entry “a market served by a single firm” 14 Monopoly.

Chapter 10: Perfect competition

Monopoly - Characteristics

Chapter Twenty-Four Monopoly. Pure Monopoly u A monopolized market has a single seller. u The monopolist’s demand curve is the (downward sloping) market.

Session 3 Monopoly Managerial Economics Professor Changqi Wu.

Monopoly Monopoly and perfect competition. Profit maximization by a monopolist. Inefficiency of a monopoly. Why do monopolies occur? Natural Monopolies.

Copyright©2004 South-Western 15 Monopoly. Copyright © 2004 South-Western A firm is considered a monopoly if... it is the sole seller of its product. its.

Figure 8.2 How a Competitive Firm Maximizes Profit

The Production Decision of a Monopoly Firm Alternative market structures: perfect competition monopolistic competition oligopoly monopoly.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly u A monopoly is the sole seller of its product.  its product does not.

© 2010 W. W. Norton & Company, Inc. 24 Monopoly. © 2010 W. W. Norton & Company, Inc.  Pure Monopoly u A monopolized market has a single seller. u The.

Chapter 24 Monopoly. 2 Pure Monopoly A monopolized market has a single seller. The monopolist’s demand curve is the (downward sloping) market demand curve.

Copyright © 2004 South-Western Monopoly vs. Competition While a competitive firm is a price taker, a monopoly firm is a price maker. A firm is considered.

Price Discrimination Price discrimination is the practice of selling different units of a good or service for different prices. To be able to price discriminate,

1. Introduction to Price Fixing: Legal and Economic Foundations Antitrust Law Fall 2014 Yale Law School Dale Collins SLIDES FOR CLASS.

1 Intermediate Microeconomics Monopoly. 2 Pure Monopoly A Monopolized market has only a single seller. Examples? XM radio? Microsoft? Walmart in a small.

Monopoly ETP Economics 101. Monopoly  A firm is considered a monopoly if...  it is the sole seller of its product.  its product does not have close.

1 Intermediate Microeconomics Monopoly. 2 Pure Monopoly A Monopolized market has only a single seller. Examples: XM radio? Microsoft? Walmart in a small.

Chapter Firms in Competitive Markets 13. What is a Competitive Market? The meaning of competition Competitive market – Market with many buyers and sellers.

© 2009 Pearson Education Canada 10/1 Chapter 10 Monopoly.

MONOPOLY MONOPOLY Asst. Prof. Dr. Serdar AYAN. Causes of Monopoly u Legal restrictions u Patents u Control of a scarce resources u Deliberately-erected.

Copyright © 2006 Thomson Learning 15 Monopoly. Figure 1 Economies of Scale as a Cause of Monopoly Copyright © 2004 South-Western Quantity of Output Average.

Monopoly 垄断.  A monopolized market has a single seller.  The monopolist’s demand curve is the (downward sloping) market demand curve.  So the monopolist.

Chapter 24 MONOPOLY Maximizing profits The monopolist will always set p=p(y). r(y)=p(y)y The monopolist’s profit-maximization problem then takes.

MONOPOLIES.  Single seller (pure monopoly) – industry with only one dominant company  Cartel agreement – group of producers who enter a collusive agreement.

1.  exists when a single firm is the sole producer of a product for which there are no close substitutes. 2.

1 Monopoly Molly W. Dahl Georgetown University Econ 101 – Spring 2009.

CH13 : MONOPOLY CH13 : MONOPOLY Asst. Prof. Dr. Serdar AYAN.

Monopoly 1. Why Monopolies Arise Monopoly –Firm that is the sole seller of a product without close substitutes –Price maker Barriers to entry –Monopoly.

Monopoly 15. Monopoly A firm is considered a monopoly if... it is the sole seller of its product. it is the sole seller of its product. its product does.

Market Power and Welfare Monopoly and Monopsony. Monopoly Profit Maximization A monopoly is the only supplier of a good for which there is no close substitute.

Chapter Twenty-Four Monopoly.

Chapter 24 Monopoly.

Lecture 19 Monopoly.

Monopoly © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a.

ECN 201: Principles of Microeconomics

Lecture 19 Monopoly.

Lecture 20 Monopoly.

Lecture 20 Monopoly.

L18 Supply of a firm.

L17 Supply of a firm.

Supply function, Entry and market structure

Lecture 19 Monopoly.

Lecture 20 Monopoly.

Monopoly versus Perfect Competition

price quantity Total revenue Marginal revenue Total Cost profit $20 1

Lecture 19 Monopoly.

Monopoly (Part 2) Chapter 21.

Chapter 10: Perfect competition

Lecture 19 Monopoly.

CH13 : MONOPOLY Asst. Prof. Dr. Serdar AYAN

Monopoly © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a.

Monopoly © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a.

Lecture 20 Monopoly.

Presentation transcript:

Lecture 20 Monopoly

Market structure Market structures: u A monopolized market - a single seller. u Monopoly affects the price (has market power) u Takes the price effect into account u Today: choice without disctimination pall N … Name

Monopoly u What causes monopolies? 1.large fixed costs (Natural Monopoly) 2.a legal fiat (US Postal Service) 3.a patent (a new drug) 4.sole ownership of a good ( a toll highway) 5.formation of a cartel (OPEC)

Profit Maximization u Secret of happiness (FOC): u Intuition: the last unit gives the same in terms of revenue as it costs u Competitive firm u Monopoly: MR not equal to price

Marginal Revenue and Price u Competitive firm u Monopoly

Profit of a Monopoly u Profit of the monopoly u Suppose u Total Revenue u Marginal Revenue

y maximizing profit u Secret of happiness (FOC): u Intuition: the last unit gives the same in terms of revenue as it costs u Difference: MR not equal to price

y maximizing profit: geometry p y

Pareto Efficiency u Competitive markets efficient u Is outcome Pareto Efficient when one “trader” is big? u Loss of efficiency – deadweight loss u Total Potential Surplus –competitive benchmark –monopoly

Gains to trade u Gains to trade-Total Potential Surplus (TPS)

Competitive Benchmark u Competitive supply: p=MC u Consumer’s and Producers Surplus

Monopoly: Deadweight loss u Monopoly

u How to measure market power? u Candidate 1: u Problem: u Candidate 2: Measurement of market power

Regulation of a Natural Monopoly

Regulating a Natural Monopoly u So a natural monopoly cannot be forced to use marginal cost pricing. Doing so makes the firm exit, destroying both the market and any gains-to-trade. u Regulatory schemes can induce the natural monopolist to produce the efficient output level without exiting.