JWI 515 Managerial Economics, Week6 Summary, 11/18/12
Very interesting week with many important take aways. As the technology industry evolves rapidly, this training prepares me to
confidently face a variety of business situations.
(i) Maximizing
profits with smart price-output decisions is the goal.
(ii) Recognition of imperfect competition and appreciation of market
structure within which a firm operates are key to make good managerial
decisions.
(iii) Competition types: Perfect competition, Oligopoly, Monopolistic competition, Monopoly
Monopoly - A pure monopolist is the sole provider of a product or service with no
close substitutes, is often a price maker and maximizes profit when
MR=MC.The marginal revenue curve is below the demand curve. Monopolies
can cause a dead weight loss to society but are not necessarily always
harmful. With strong economies of scale, natural monopolies can offer
lower prices than if several small companies competed. Antitrust laws keep monopolies in check.
Monopolistic competition - each firm produces a small percentage of the
total market share and cannot control prices; product differentiation
key. Monopolistically competitive firms should focus on product differentiation.
Oligopolists must focus on price, output and reactions of rivals.
Cartels & Collusions - group of competitors formally or informally agreeing to fix prices and output
(iv) Price-Output decisions Models
Cournot: a firm will make independent decisions to maximize its profit
Stackelberg: firm acts according to Cournot + first mover advantage
Bertrand: Homogeneous oligopolists; consumer goes after lowest price; price wars ensue to capture market share
Sweezy: firms will follow rivals' price decrease but ignore price increase
Dr DP
No comments:
Post a Comment