Mankiw's Principles of Microeconomics Chapter 17
Credit to Tina Brown for providing the clip in the discussions
This chapter and blog post wraps up this module with the last type of market - oligopoly. Oligopoly is a great word to use in casual conversation, so pay attention to this chapter. The next time someone talks about how nice it would have been if AT&T had bought T-Mobile you can say "I agree! The phone industry would still have been an oligopoly, there was no risk of creating a monopoly." Of course a few people will wonder if you have perhaps started drinking, but most people will be really impressed.
1. What do you think about anti-trust laws with respect to the cell-phone industry? Do you think the cell phone industry could be an oligopoly? Why or why not?
I am of the opinion that the cell phone market is an oligopoly. To take a case in point, if AT&T were allowed to merge with T-Mobile, Verizon would lobby for the same permission to merge with Sprint. With the eventual combination of only 2 providers, that would influence the production levels of both of them. Based on the Nash Equilibrium, it would also lead to both supplying more which would cause lower prices for consumers because of increased supply.
I am of the opinion that the cell phone market is an oligopoly. To take a case in point, if AT&T were allowed to merge with T-Mobile, Verizon would lobby for the same permission to merge with Sprint. With the eventual combination of only 2 providers, that would influence the production levels of both of them. Based on the Nash Equilibrium, it would also lead to both supplying more which would cause lower prices for consumers because of increased supply.
2. Take a few moments to explain how a decision box works. What about Oligopolies is most unclear to you?
There isn't much that's confusing about Oligopolies; it's a market structure in which only a few sellers offer similar or identical products? The first one that comes to mind is the oil cartels. The cartels control the supply but as Adam Smith once said, "In competition, individual ambition serves the common good." Groups can organize, cartels can form, but the human spirit of greed will drive each to attempt to outmaneuver the other. Oligopolies will always be out for their own best interests. As a result, price decreases due to competition.
Corporate psychological warfare is game theory at its best. The decision box is a tool that each contender uses in an attempt to reach their own dominant strategy. However, this box is in perpetual tension and what’s driving that is the need for each to increase their market share.
There isn't much that's confusing about Oligopolies; it's a market structure in which only a few sellers offer similar or identical products? The first one that comes to mind is the oil cartels. The cartels control the supply but as Adam Smith once said, "In competition, individual ambition serves the common good." Groups can organize, cartels can form, but the human spirit of greed will drive each to attempt to outmaneuver the other. Oligopolies will always be out for their own best interests. As a result, price decreases due to competition.
Corporate psychological warfare is game theory at its best. The decision box is a tool that each contender uses in an attempt to reach their own dominant strategy. However, this box is in perpetual tension and what’s driving that is the need for each to increase their market share.
No comments:
Post a Comment