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Monopolistic Competitors – Price and Quantity

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How do Monopolistic Competitors Choose Price and Quantity? The monopolistically competitive firm decides on its profit-maximizing quantity and price in much the same way as a monopolist. A monopolistic competitor, like a monopolist, faces a downward-sloping demand...

Monopolistic Competitors – Market Entry

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How do Monopolistic Competitors Affect Market Entry? If one monopolistic competitor earns positive economic profits, other firms will be tempted to enter the market. The entry of other firms into the same general market  shifts the demand curve that a monopolistically...

Forcing Cooperation in a Prisoner’s Dilemma

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How to Force Cooperation in a Prisoner’s Dilemma? The way out of a prisoner’s dilemma is to find a way to penalize those who do not cooperate. Perhaps the easiest approach for colluding oligopolists, as you might imagine, would be to sign a contract with each other...

Cooperation in a Kinked Demand Curve

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does Cooperation Affect the Kinked Demand Curve? Because oligopolists cannot sign a legally enforceable contract to act like a monopoly, the firms may instead keep close tabs on what other firms are producing and charging. Alternatively, oligopolists may choose to...

Measuring Monopoly Power in an Industry

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What are Some Other Approaches to Measuring Monopoly Power in an Industry? Both the four-firm concentration ratio and the Herfindahl-Hirschman index share some weaknesses. First, they begin from the assumption that the “market” under discussion is well-defined, and...
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