Download - Final presentation of Economic analysis for managers Presented to : Sir Dr. Khurram Mughal
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Final presentation of Economic analysis for managers
Presented to :
Sir Dr. Khurram Mughal
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Economics analysis for managers
Group Members
Name ID
Saad yaqub 13646
Farhan Hussain 15570Ali Shaharyar 15366
Zameer Ahmad 15582Mehmood
Akram 15303M Shoaib 15206
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Outline
OligopolyMonopolistic competition
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Perfect competition
Monopoly
Monopolistic competition
Oligopoly
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Monopolistic competition
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes.
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CharacteristicsNumber and size distribution of sellers
Number and size distribution of buyers
Product differentiation
Conditions of entry and exit
many small sellers
many small buyers
slightly different products
Easy entry and exit
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S
O
MC
AC
MRAR=D
P
Q Output
AC
Profit maximizing in short run
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S
O
MC
AC
MR
AR=D
P
Q Output
Profit maximizing in Long Run
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S
O
MC
AC
MR
AR=D
P
Q Output
Evaluation of monopolistic completion
Because of inefficiency in production per
unit cost is slightly higher
then price.
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An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (Oligopolists)
Oligopoly
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Characteristics
Ability to set price
price setters rather than price takers
Number and size distribution of sellers
many small buyers
Product differentiation
Entry and exit
product may be homogeneous or differentiated
barriers to entry
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Varieties of Oligopoly
The product can be homogeneous or differentiated
across producers The more homogeneous the products, the greater the interdependence among the firms
Products can be differentiated
physical qualitiessales locationsservices image of the product
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DShare of market demand curve
d
Perceived demand curve
Quantity per period
P1
Q1
P2
Q2 Q21
Pri
ce p
er
un
it
Oligopoly
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Models of oligopoly
The kinked demand model
Price leadership
Cournot-Nash model
Bertrand model
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The kinked demand model
• One firm increase priceit will reduce its customers because other firms will may not increase their prices
• One firm decrease the priceno increase in its customers because other firms will also decrease their prices
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Price leadership
To avoid active competition between firms in oligopoly some firms use price fluctuation.There are two types of price leadership
Dominant firm price leadership In some markets there is a single firm that controls a
dominant share of the market and a group of smaller firms. The dominant firm sets prices which are simply taken by the smaller firms in determining their profit maximizing levels of production.
Barometric price leadership In barometric firm price leadership, the most reliable
firm emerges as the best barometer of market conditions, or the firm could be the one with the lowest costs of production, leading other firms to follow suit.
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Cournot-Nash model
• The Cournot-Nash model is the simplest oligopoly model. The model assumes that there are two “equally positioned firms”; the firms compete on the basis of quantity rather than price and each firm makes an “output decision assuming that the other firm’s behavior is fixed.
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• The Bertrand model is essentially the Cournot-Nash model except the strategic variable is price rather than quantity.
• Neither firm has any reason to change strategy. If the firm raises prices it will lose all its customers. If the firm lowers price it will be losing money on every unit sold
Bertrand model
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cartels and collusion
What is collusion? Unofficial hidden agreement between two or more persons/firms.E.g. Sugar industry
What is a cartel?A cartel is a formal agreement among competing firms.e.g. OPEC (Organization of the Petroleum Exporting Countries)
Collusion and Cheaters?When one firm in collusion agreement cheats to get more profit.