ECO101H1 Lecture Notes - Lecture 10: Deadweight Loss, Economic Equilibrium, Oligopoly
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ECO101H1 Full Course Notes
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They reduce consumer surplus and create deadweight loss. If producer surplus is larger than fixed cost, then they would operate. Arbitrage is not a big problem (ppl buying low selling high) Ability to sort consumers based on wtp (elasticity) Optimal quantity of production for oligopoly: split the monopolist quantity among oligopolistic producers. Splitting the monopoly quantity is not an equilibrium. Also shows that with more firms, the equilibrium price approaches perfect competition. In a market of standardized goods where firms compete on price without capacity constraints, it only takes 2 firms to get marginal cost pricing (perfect competition market equilibrium) Tacit collusion: firms unofficially agree to not engage in price wars to achieve long term higher payoffs for both. Tit-for-tat: collude in period 1, every following period, firms play whatever previous strategy was played. Grim trigger: collude in period 1, once you break agreement, you never go back. Importance of nonmembers (other niggas that can fuck wit production quantity)
