ENV347H1 Lecture Notes - Lecture 6: Oligopoly, Game Theory, Nash Equilibrium
11 Dec 2016
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Cartel: group of firms collab to control market by restricting output. Illegal everywhere - instead have competition, anti-trust laws. John blair, economic advisor to us senate investigating anti-trust violations of us major oil companies. Concluded there were "seven sisters" - cartel bw bp, shell, exxon, etc. Rockefeller standard oil trust: too much of a monopoly, so broken up into cali, nj, ny, indiana, conflict of interest with chase manhattan bank executives, allowing them to coordinate like a cartel still. Mergers are bringing standard oil back together --> now exxon. 4 segments - exploration, production, refining, sales. Refined products (very few companies do only this: gasoline/ diesel, aviation/ fuel, natural gas/ liquids/ petrochemicals, plastics. Founded 1960 by saudi arabia, iraq, kuwait, venezuela, iran. 1973 oil embargo tripled price of oil overnight: opec had 50% of world production. 1979 embargo tripled again: lowered demand, increased non-opec supply to 25% Persistence of opec the main refutation of conventional economic analysis of cartels.
