Reading 13. The firm and market structures
13a. Describe characteristics of perfect competition,monipolistic competition, oligopoly and pure monopoly.
13b.Explain relationships between price, marginal revenue, marginal cost, economic profit and the elasticity of demand under each market structure.
13d. Describe and determine the optimal price and output for firms under each market structure.
13e. Explain factors affecting long-run equilibrium under each market strucutre.
几个图
permanet change in demand导致企业进入或退出该行业
13.2 monopolistic competition
垄断特征：
1)a large number of independent sellers:
A. no individual firm has power over price
B. only pay attention to average market price, not individual competitors
C. too many firms in the industry for collusion共谋成为可能
2)differentiated products
3)firms compete on price, quality and marketing as a result of product differentiation.
4)low barriers to entry
downward-sloping demand curves--they are price searches
demand curves are highly elastic
consumers benefit from brand name promotion and advertising --cos receive information about nature of a product.-enable consumers to make better purchasing decisions.
1)product innovation-necessary activity as firms in monopolistic competition pursue economic profits.
new and innovative products are confronted with less-elastic demand curves,enable increase price and earn economic profits.
模仿会erode the initial profit
所以，垄断的公司must continually look for innovative product features that will make products relatively more desirable to some consumers than those of the competition.
创新意味着高成本，成本must be weighed against the extra revenue.
a firm is considered to be spending the optimal amount on innovation when the margin cost of innovation =marginal revenue(marginal benefit) of additional innovation.
2)Advertising expenses-high for monopolistic competition.
advertising costs increase the average total cost curve for a firm in monopolistic competition.
lead to increase in output, it decreases a firm's average total cost.
3)brand name
reputation BMW has for high quality is so valuable that the firm has an added incentive not to damage it by producing vehicles of low quality.
13.3 Oligopoly
4 models and implications for price and quantity:
a. Kinked demand curve model
传统的寡头模型：斯威齐模型（折弯需求曲线模型）
based on the assumption:
价格上涨不会被其他竞争者追随，价格下跌会收到追随。
每个企业相信他们面临一条需求曲线，在某个特定价格意思的部分更有弹性，下面的部分更缺乏弹性。市场需求的拐点，正是公司利润最大化的点。
缺点：未说明市场价格是如何确定的（拐点是怎么确定的）
b.Cournot duopoly model 古诺双寡头模型
developed in the early 19th century
only 2 firms competing and both have identical and constant marginal costs of production.
early version called "strategic games"战略博弈的早期版本，指对于一家厂商而言，最好的决策取决于另一家厂商对他策略的反应状况。
利润最大化的产量水平，均衡价格水平
c. nash equilibrium model(prisoner's dilemma)
指这一点上没有任何其他决策可以使得市场中任意一家厂商的利润增加或损失降低。
prisoner's dilemma
寡头垄断市场下的共谋协议在如下情况更容易成功：
fewer firms
products are less differentiated
cost structures are more similar.
purchases are relatively small and frequent.
relation by other firms for cheating is more certain and more severe.
less actual or potential competition from firms outside the cartel.
d. Stackelberg dominat firm model
dominant firm model优势厂商模型
-single firm has a significantly large market share--greater scale and lower cost structure -the dominant firm(DF)
13.4 monopoly and concentration
a monopoly faces a down-sloping demand curve for its product,
profit maximization involves a trade-off between price and quantity
垄断厂商面临向下倾斜的需求曲线，利润最大化涉及到价格和产量销售之间的相互替代trade off（如果企业面向所有买者同样的价格销售产品）。
2 princing strategies for monopoly firm:
1)single-price单一价格
垄断厂商不能重新出售产品，垄断者能通过为不同类型的消费者定不同价格来达到利润最大化。垄断者一直扩大生产到MR=MC，最佳产量处。
2)price discrimination
charing different consumers different prices for the same product or service.
The motivation for a monopolist is
to capture more surplus as economic profit than is possible by charging a single price.
For price discrimination to work, the seller must:
a. face a downward-sloping demand curve
b.at least two identifiable groups of customers with different price elasticities of demand for the product对于产品和服务至少有两个不同价格需求弹性的消费者群体
c.prevent the customers paying the lower price from reselling the product to customers paying the higher price防止两个不同消费群体之间的消费
Natural monopoly自然垄断
是指整个行业ATC在只有一个企业的时候最小。ATC在整个相关的产出范围内是下降的，固定成本FC高，边际成本低。
eg.electric utility
average cost pricing-most common form of regulation.
it forces monopolists to reduce price to where the firm's ATC intersects the market demand curve.
output上升,price下降
social welfare上升 (allocative efficiency)
ensure the monopolist a normal profit because price=ATC
1)Marginal cost pricing--efficient regulation-forces the monopolist to reduce price -firm's MC curve intersects the market demand curve.
2)government to sell the monopoly right to the highest bidder.
in theory, the winning bidder will be an efficient supplier that bids an equal to the value of expected economic profit and sets prices =long-run average cost.
13c. Describe a firm's supply function under each market structure.
The short-run supply function for a firm under perfect competition is marginal cost curve above average variable cost curve.
The short-run market supply curve is constructed by
-sum the quantities supplied at each price across all firms
oligopoly and monopoly, there is no well-defined supply function.
The quantity supplied is determined by the intersection of marginal cost and marginal revenue, the price charged is determined by the demand curve the firm faces.-not only on a firm's marginal cost, but on demand and marginal revenue.
13f. Describe pricing strategy under each market structure.
optimal pricing strategies:
profits are maximized by producing the quantity for marginal cost=marginal revenue.
a.Perfect competition: marginal revenue and price 相等，price=marginal cost at the profit-maximizing quantity.
b.Monopoly: price 大于marginal revenue and marginal cost.
c.Monopolistic competition:similar to monopoly
d.Oligopolu: key characteristic is interdependence of firms' pricing and output decisions. the optimal pricing strategy depends on assumptions about the reactions of other firms to each firm's actions.
1)kinked demand curve:假设竞争者会降低价格而不是抬价，match a price decrease.但是边际收入曲线是不连续的，面对相同弯曲的需求曲线，成本结构下的最优产量水平是相同的。
2)collusion:共谋型，如果所有生产商共享市场份额，使行业利润最大化，他们会在边际成本=边际收入这个点对应的产量上生产。但是寡头必须同意在不同的厂商之间分配市场份额和由此产生的利润。
3)dominant firm model优势厂商模型
assume a firm has lowest cost structure and large market share.
dominat firm will max profits by producing the quantity for marginal cost=marginal revenue and charge the price on its firm demand curve for quantity.
其他企业会接受这一价格并在各自的边际成本=价格的产量水平上进行生产。
4)Game theory:博弈论
assumption-a competitor react to a particular price and output decision by a competitor can determine the optimal output and pricing strategy.
long-run outcome is 不确定的，只能确定的是，价格在完全垄断和完全竞争的价格之间，在此水平上，价格=边际成本。
13g. Describe the use and limitation of concentration measures in identifying market structure.
市场集中度方法用作市场影响力的指示器。
concentration measures for a market or industry are very often used an indicator of market power.
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N-firm concentration ratio
the sum or the percentage market shares of the largest N firms in a market.
计算某一市场中N个最大的公司的市场份额百分比的总和。
优点：方法简单，不要直接计算市场影响力和需求弹性。
缺点： insensitive to mergers of two firms with large market share.
2）HHI-Herfindahl-Hirschman Index用来解决并购敏感度（上面的问题）
-sum of the squares of the market shares of largest firms in the market.
计算方法：几个大公司的市场份额平方后加总。
两种计算法的共同缺点：没有考虑新公司进入市场的难易程度。
如果barrier小，就有很多潜在的竞争者，那么即使是一个有很大市场份额的公司也没有定价权。现有公司的需求弹性小，即使有较高的市场份额，市场集中度计算也很大。
13h. Identify the type of market structure within which a firm operates.
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