ECN 104 Lecture Notes - Lecture 10: De Beers, Product Differentiation, Economic Surplus
5 Dec 2016
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Document Summary
In order to develop principles and make predictions about markets and how producers will behave in them, economists have developed four principal models of market structure: perfect competition, monopoly, oligopoly, monopolistic competition. This system of market structures is based on two dimensions: the number of producers in the market, (one, few, or many, whether the goods offered are identical or differentiated. Differentiated goods are goods that are different but considered somewhat substitutable by consumers (think coke versus pepsi). A monopolist is a firm that is the only producer of a good that has no close substitutes. An industry controlled by a monopolist is known as a monopoly, e. g. de. The ability of a monopolist to raise its price above the competitive level by reducing output is known as market power: this generates profit for the monopolist in the short run and long run.
