A Duopoly Example: Price and Quantity Supplied The socially efficient quantity of water is 120 gallons, but a monopolist would produce only 60 gallons of water. e So what outcome then could be expected from duopolists? H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. A Duopoly Example: Price and Quantity Supplied uThe socially efficient quantity of water is 120 gallons, but a monopolist would produce only 60 gallons of water. uSo what outcome then could be expected from duopolists?
Competition, Monopolies, and Cartels The duopolists may agree on a monopoly outcome ◆ Collusion e The two firms may agree on the quantity to produce and the price to charge. ◆ Cartel e The two firms may ioin together and act In unison。 Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Competition, Monopolies, and Cartels uThe duopolists may agree on a monopoly outcome. uCollusion uThe two firms may agree on the quantity to produce and the price to charge. uCartel uThe two firms may join together and act in unison
Competition, Monopolies, and Cartels Although oligopolists would like to form cartels and earn monopoly profits, often that is not possible. Antitrust laws prohibit explicit agreements among oligopolists as a matter of public policy. H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Competition, Monopolies, and Cartels Although oligopolists would like to form cartels and earn monopoly profits, often that is not possible. Antitrust laws prohibit explicit agreements among oligopolists as a matter of public policy
The Equilibrium for an oligopoly A Nash equilibrium is a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the others have chosen H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Equilibrium for an Oligopoly A Nash equilibrium is a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the others have chosen
The Equilibrium for an Oligopoly When firms in an oligopoly individually choose production to maximize profit, they produce quantity of output greater than the level produced by monopoly and less than the level produced by competition. Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Equilibrium for an Oligopoly When firms in an oligopoly individually choose production to maximize profit, they produce quantity of output greater than the level produced by monopoly and less than the level produced by competition