Final Flashcards
(21 cards)
Company’s value net
1) customers 2) company 3) substitutes 4) suppliers 5) complementors
Ogliopoly
few firms, entry by new firm is not free, may or may not be differentiated
nash equilibrium
i do the best i can given what i think you are doing. you do the best you can given what you think i am doing.
cournot competition
quantity competition
bertrand competition
price competition. avoid bertrand if you can. Addition of one firm turns monopoly into perfect competition. How to avoid: be the cost leader, limit capacity, product differentiation, branding, implicit or explicit agreement on price.
hotelling competition
horizontal differentiation. allows us to examine firms selling heterogenous products.
horizontal differentiation
consumers disagree on which product is better. geographic differentiation is a form of horizontal differentiation.
vertical differentiation
consumers agree on which product is better. fuel efficiency in cars, memory in mp3 players
cournot competition
two firms sells identical products. market price is determined by outputs together. marginal cost is the same for both firms.
differentiation
differentiation increases profits by dampening price competition
cartel
In ongoing relationships, promise of future rewards and the threat of future punishment can induce good behavior today
Bilateral Oligiopolies
limited number of sellers selling to limited number of buyers. upstream and downstream firms.
vertical integration
may not always be practical. it is a strategic choice. promoting competition downstream can be useful. costs are not easily verifiable
Double Marginalization
Each of the firms could be considered monopolies but when you have an upstream retailer or manufacture there are tarrifs in place to make sure each party makes a profit
agreement between manufacture and retailer
manufacture to charge the retailer marginal cost of production and then a fixed fee is used to divide the profits
Perfect Competition
MR=MC=P
Profit Maximizing Quantity
Derivatives = 0
Cournot
Films simultaneously choose quantity. Simultaneous moving. Firms face common aggregate demand curve. Example: oil producers
Bertrand Competition
firms simultaneously set price. price war. no differentiation with product. similar cost function. no differentiation with product. similar cost function. firms undercut each other for p=MC. example gas stations
hotelling
firms simultaneously set price. differentiation in positioning, transport or switching costs. p = MC + t
Porter’s five forces
○ Threat of new entrants
○ Bargaining power of suppliers
○ Rivalry among competitors
○ Substitutes
○ Complements
○ Bargaining power of buyers
