MGEC40H3 Lecture Notes - Lecture 6: Monopolistic Competition, Bertrand Competition, Substitute Good
10 Jul 2014
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Today"s outline (continuation of market structure/competition: pc social welfare, monopoly, oligopoly courtnot model bertrand model, monopolistic competition hotelling model. Monopoly: single supplier with no close substitute, so pepsi and coke are not monopolies, barriers to entry must exist (can be government-imposed barriers like license, patent, controlling of scarce input) So oligopolies partake in strategic interaction: like a soccer goalie, you have to anticipate which direction to block. These diagrams show imperfect competition: assume that pmax is about rent control , there will be excess demand for rent, cs is above the price but below demand, ps is below the price but above supply. In pmin : there is excess supply, so basically if you throw the price and quantity off its equilibrium, there will always be. This way, the price that goes out the door ends up being mc. Assume the market demand curve is p = 100-q. And mr = 100 2q (double the slope, same intercept)
