Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedOligopoly and Monopolistic CompetitionJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 13.01 Properties of Monopoly, Oligopoly, Monopolistic Competition, and CompetitionJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 13.02 Profit Matrix for a Quantity-Setting GameJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.01 Competition Versus CartelPrice, p,$ per unit(a) Firmqcq*qmQuantity, q, Unitsper yearSMRMarket demandACMCpmMCmpcpmemecMCmpcPrice, p,$ per unit(b) MarketQmQcQuantity, Q, Unitsper yearJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.02a American Airlines’ Profit-Maximizing Outputp, $ perpassengerMCMRD(a) MonopolyqA, Thousand American Airlinespassengers per quarter3391472430 339169.596Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.02b American Airlines’ Profit-Maximizing OutputMRrDrDp, $ perpassengerMC(b) DuopolyqA, Thousand American Airlinespassengers per quarterqU= 643391472752110 339275137.564 128Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.03 American and United’s Best-Response CurvesqU, Thousand Unitedpassengers per quarterUnited’s best-response curveCournot equilibriumAmerican’s best-response curveqA, Thousand Americanpassengers per quarter1926448960 1929664Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.04a Duopoly EquilibriaPrice-taking equilibriumqU, Thousand Unitedpassengers per quarterUnited’s best-response curveCournot equilibriumCartelequilibriumStackelberg equilibriumContractcurveAmerican’s best-response curve(a) Equilibrium QuantitiesqA, Thousand American passengers per quarter1926448960 192966448Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.04b Duopoly EquilibriaπU, $ million profitof United AirlinesCournot profitsPrice-taking profitsProfit possibility frontierCartel profitsStackelbergprofitsAmerican monopolyprofit(b) Equilibrium ProfitsπA, $ million profit of American Airlines9.24.12.34.609.24.64.1Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 13.03 Cournot Equilibrium Varies with the Number of FirmsJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.05 Stackelberg Game TreeAmerican649648(4.6, 4.6)(3.8, 5.1)(2.3, 4.6)48Leader’s decision Follower’s decision Profits (πA, πU)649648(5.1, 3.8)(4.1, 4.1)(2.0, 3.1)64649648(4.6, 2.3)(3.1, 2.0)(0, 0)96UnitedUnitedUnitedJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.06Stackelberg EquilibriumqU, Thousand Unitedpassengers per quarterqA, Thousand American passengers per quarterqU= 48960 qA= 96MRrDrDMCp, $ perpassenger(a) Residual Demand American FacesqA, Thousand American passengers per quarterqU= 483391952431470339192192qA= 96 Q = 144United’s best-response curve(b) United’s Best-Response CurveJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.07a Effect of a Government Subsidy on a Cournot EquilibriumMC1MC2MRrDrDp, $ per passenger(a) United’s Residual DemandqU, Thousand Unitedpassengers per quarterqA= 64339147275990 339275137.564 88Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.07b Effect of a Government Subsidy on a Cournot EquilibriumqU, Thousand Unitedpassengers per quarter(b) Best-Response CurvesqA, Thousand Americanpassengers per quarter192886448961200 192 24048 64 96e2e1United’s new best-responsecurve (MC= $99)United’s original best-responsecurve (MC= $147)American’s best-response curve (MC= $147)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 13.04 Effects of a Subsidy Given to United AirlinesJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 13.1Output of Firm B,qB, Units per yearFirm B’s before-taxbest-response curveFirm B’s after-tax best-response curveFirm A’s before-tax best-response curveFirm A’s after-tax best-response curveOutput of firm A, qA, Units per yearq2q2q1e2e1q145° lineJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 13.05 Comparison of Airline Market StructuresJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.08 Monopolistically Competitive Equilibriump, $ per unitq, Units per yearqpMRrDrMCACp = ACMRr= MCJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.09a Monopolistic Competition Among Airlinesp, $ perpassenger275137.5640q, Thousand passengersper quarter300275211183147(a) Two Firms in the MarketACMCMRrfor 2 firmsπ= $1.8 millionDrfor 2 firmsJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.09b Monopolistic Competition Among Airlinesp, $ perpassenger243121.5480q, Thousand passengersper quarter300243195147(b) Three Firms in the MarketACMCMRrfor 3 firmsDfor 3 firmsrJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.10 Bertrand Equilibrium with Identical Productsp2, Price of Firm 2,$ per unitFirm 2’s best-response curveFirm 1’s best-response curve45° lineep1, Price of Firm 1, $ per unit10505109.99Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 13.11 Bertrand Equilibrium with Differentiated Productspc, Price of Coke,$ per unitPepsi’s best-responsecurve (MCp= $5) Coke’s best-responsecurve (MCc= $14.50)Coke’s best-responsecurve (MCc= $5)pp, Price of Pepsi, $ per unit25181302513
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