Economics 2010a Fa|2003 Lecture 11 Edward L. Glaeser
Economics 2010a Fall 2003 Lecture 11 Edward L. Glaeser
11. Competition and monopoly, some preliminary discussions Monopoly Pricing b. Cournot and Bertrand Oligopoly C. TWo Part Pricing d. Price Discrimination e. Regulation
11. Competition and Monopoly, some preliminary discussions a. Monopoly Pricing b. Cournot and Bertrand Oligopoly c. Two Part Pricing d. Price Discrimination e. Regulation
Standard monopoly result is quite straightforward Q is set to maximize P(Q)Q-C(Q)Which yields P(Q)Q+P(Q)=C(Q)or C(Q) 1+ o aP P(O) Cournot oligopoly-n firms-fixed entry choose q to maximize P(Q+∑9)Q-C(Q) or P(∑)+P(∑9)=CQ) or C"(Q=P(Q)(1+。如)
Standard monopoly result is quite straightforward Q is set to maximize P(Q)Q-C(Q) which yields: P’(Q)QP(Q)C’(Q) or C Q PQ 1 Q P P Q 1 1 Cournot oligopoly– N firms– fixed entry– choose Q to maximize: P Qi ji Qj Qi CiQi or P j Qj Qi P j Qj Ci Qi or C Q PQ1 Qi Q Q P P Q
or P(Q)=C(Q)-5 thats the markup over marginal cost
or PQ C Q Qi Q that’s the markup over marginal cost
Claim: we know that industry profits are lower under cournot oligopoly than under monopoly(assuming identical cost curves) Is it possible that industry output will be lower under cournot oligopoly than under monopoly? Assume identical cost curves and write P(NO()O(N)+P(NO(ND)=C(O(N) Differentiation with respect ton then yields P(NOQ(N+OP (NO(O+NO(N)+ P(NO(O+NO(M)=C(Q@(M Solving this yields
Claim: we know that industry profits are lower under cournot oligopoly than under monopoly (assuming identical cost curves) Is it possible that industry output will be lower under cournot oligopoly than under monopoly? Assume identical cost curves and write: P NQNQN PNQN C QN Differentiation with respect to N then yields: P NQQ N QPNQQ NQ N P NQQ NQ N CQQ N Solving this yields: