1. Starter
Discussion point pg13

2. Lesson Objectives
All students will consider the effect of the degree of competition on market price and output
Most students will be able to understand the complexity of oligopoly
Some students will understand the potential losers in these markets and role of government in them.

3. The spectrum of competition
Monopoly
Single producer in market
Perfect Competition
No producer has market power
Imperfect Competition
Strong competition but producers
still have an element of market power

4. The spectrum of competition
Imperfect competition covers intermediate market structures:
Monopolistic competition – many producers and product differentiation
Oligopoly – small number of large producers
Duopoly - just 2 large producers

5. Oligopoly
Few very large firms which dominate the market some smaller firms competing
The degree of competition can measured by looking at
Market share of dominant firms
Concentration ratio – measure of the extent to which a market is dominate by large firms (adding market shares of largest of 3 – 5 firms) e.g. UK Supermarkets figure 1 pg 14
4 firm concentration ratio = 73%
What is the 4 firm concentration ratio in handset market?

6. Oligopolistic strategies
Oligopolists will avoid price competition because of the damage it can do to the profits of all firms in the market
Price Wars – may start as predatory pricing but rival might simply counter with own price cuts with loses for all involved
Oligopolists are aware of greater Interdependence in their market

7. Tacit collusion
Firms separately coming to an understanding that it is in their joint interest not to compete vigorously – without any contact or agreement between them which may be illegal (overt collusion)

8. Price discrimination
Involves charging different prices to different customers for essentially the same product or service.
Can you think of any examples?
Look at example bottom of pg 16

9. Price discrimination Can only work if
There are clear barriers to entry
Different customers have different demand elasticity
Different customer groups can be easily separated

10. task
Exam style qs pg 17