ECON 20 Lecture Notes - Lecture 5: Perfect Competition, Market Power
19 May 2020
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Unrealistic, may do it different ways: ex. Gas station owner with tons of people lining up, gas ceiling. Bc you already shown you"re willing to bare higher costs, more incentive to convert the cost you"re willing to bare to benefit me raise price. Bc everybody gets the same price can"t change another variable as effectively easily. Now you can compete on quality, service, reliability, etc: the number of variables increase. We come to see that if competition does not focus on price, there"s something wrong with it: there are other ways where not focusing on price might make you better off, ex. The problem is that the other person can"t do something as well as. The other can"t compete not because he can"t differentiate, but because i like your product so well that i"m willing to switch: ex. Because when you"re paying so much for them, they must be good ads.
