Industrial Organization: Monopoly, Competition, and Strategy
Early Models of Industrial Organization
- Cournot (1838): Used mathematics to study economics, price formation with a single supplier (monopoly), and oligopoly with simultaneous quantity setting.
- Bertrand (1883): Analyzed oligopoly with simultaneous price setting.
- Stackelberg (1934): Studied sequential setting of quantities in an oligopoly.
- Hotelling (1929) and Chamberlin (1933): Introduced the concept of product differentiation.
Schools of Thought in Industrial Organization
The Harvard School (1940s)
Key
Read MoreMicroeconomics Practice Questions: Trade, Utility, and Externalities
Microeconomics Practice: Trade, Utility, and Market Failure
1. Comparative Advantage and Trade (Refer to Figure 1)
Refer to Figure 1. From the figure, it is apparent that:
- New Zealand will experience a shortage of wool if trade is not allowed.
- New Zealand will experience a surplus of wool if trade is not allowed.
- New Zealand has a comparative advantage in producing wool, relative to the rest of the world. (C)
- Foreign countries have a comparative advantage in producing wool, relative to New Zealand.
2.
Read MoreMarket Structures: Perfect Competition vs. Monopoly Profit Analysis
Profit Functions and Market Differences
The general profit function is defined as Profit = Total Revenue (TR) – Total Cost (TC).
For a perfectly competitive firm, the profit function is: π = p · y – c(y). Here, p represents the market price, and y is the quantity produced. The firm is a price taker, meaning the price is independent of its output.
For a monopolist, the profit function is: π = p(y) · y – c(y). In this case, p(y) signifies that the price is a function of the quantity produced.
Read MoreEssential Economic Concepts: Supply, Demand, and Market Dynamics
Key Economic Concepts Defined
Economy: Basic Principles
The economy is the science that deals with the study of the satisfaction of human needs with scarce resources that have alternative uses, from which choices are made.
Economics: A Political Science
Economics is the political science that studies the laws governing the production, distribution, circulation, and consumption of material goods to satisfy human needs.
Bid: Buyer’s Willingness to Purchase
Bid: The amount of goods that buyers are willing
Read MoreR Programming Essentials: Data Manipulation & Visualization
R Data Handling Essentials
Importing Data
Importing CSV Files
Use
read.csv()to import a Comma Separated Values file:df <- read.csv("filename.csv")
Importing Stata .dta Files
Requires the
havenpackage:library(haven) df <- read_dta("stata_file.dta")
Managing Your Environment
Setting and Checking the Working Directory
Set:
setwd("your/path/here")Get:
getwd()
Data Frame Basics
Accessing a Column
Access a column using the
$operator:df$column_name
Calculating Column Mean
Calculate the mean of a numeric column:
Market Structures: Competition, Monopoly, and Monopolistic Forms
Perfect Competition: Characteristics & Output
Characteristics of Perfect Competition
- Many Buyers and Sellers: No single firm or consumer can influence the market price.
- Homogeneous Products: All firms sell identical goods, making them perfect substitutes.
- Free Entry and Exit: No barriers prevent firms from entering or exiting the market.
- Perfect Information: Buyers and sellers have full knowledge of prices and product quality.
- Price Takers: Firms accept the market price determined by industry supply