Questions tagged [competition]

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How do we find a competitive equilibrium price when 2 firms operate with different marginal costs?

Consider a homogenous goods market with the demand function Q = 30 − P, where Q and P denote quantity and price respectively. There are two firms playing a price game in the following manner: firm 1 ...
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Why are inventions inevitably correlated with imperfect competition?

Romer (1990) elaborates the incompatibility of nonrival inputs with constant returns to scale: If a production function depends on rival and nonrival inputs and both inputs are productive, then the ...
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1answer
92 views

Government Ownership vs Private Ownership

In a debate concerning long term economic strategy, a representative of a left party was trying to support that privatisation and Small Government which minimizes its own activities is not a viable ...
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2k views

Are market structures on a spectrum?

So I understand that each market structure has their own characteristics, and that for instance Perfect Competition involves high competition, and I believe Monopolistic competition slightly less so, ...
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432 views

Cournot Model Monopoly example

Good day In my Microeconomics course, we are handling the 4 imperfect competition models. Currently we are discussing the Cournot Model, however I am unsure about a certain example. This is given as ...
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1answer
244 views

What exactly is a trust?

In my history class, we're studying the Industrial Revolution and how Rockefeller came to dominate the oil industry with his Standard Oil company. According to our textbook, a man named Samuel Dodd (...
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Is the marginal cost the same for every firm in a perfectly competitive market?

Spin-off from: market equilibrium quantity $\ne$ firm profit maximising quantity? Consider a perfectly competitive market with equilibrium price $P_{eq}$ and quantity $Q_{eq}$ and firm with profit ...
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1answer
463 views

market equilibrium quantity $\ne$ firm profit maximising quantity?

Consider a perfectly competitive market with equilibrium price $P_{eq}$ and quantity $Q_{eq}$ and firm with profit maximising quantity $Q_f$ as illustrated below: I guess any firm in the market would ...
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1answer
1k views

Why does demand curve shift in, in a monopolistic competitive market?

In a monopolistic competitive market, demand curves shift in, if more firms enter the market. I can't seem to wrap my head around it. Demand remains the same, supply has increased. Shouldn't entry of ...
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It seems firms spend a lot of time and energy “capturing” market share. Why is that?

Are consumers just silly and once they like a firm they go for it regardless of the price? Or is there something more complex going on?
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100 views

Empirical Evidence of Cournot Competition?

Is there empirical evidence to validate the use of Cournot competition between multiple suppliers and a buyer? Are there models which extend Cournot competition to different levels in a larger supply ...
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91 views

Economies of scale in Robinson Crusoe economy?

I encountered the following question: Which of the following will NOT exist in a one-man economy? 1. competition 2. private property rights 3. economies of scale Turns out the answer was 1 and 2. I ...
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22 views

Are there times when firms compete more with each other?

I have the impression that sometimes firms are fiercely competing with each other, innovating and trying to gain market share and other times when firms are just hanging on. Are there any references ...
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389 views

Why do firms adjust their fixed costs in response to a change in price in a perfectly competitive market?

When firms make a profit in a perfectly competitive market, new firms enter the market and drive the price down. My textbook says that the existing firms will then adjust inputs that are fixed in the ...
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Why is Uber worth almost as much as Boeing?

At $68 billion, Uber has a higher valuation than GM, Ford, and Honda. According to Microaxis, Boeing is currently valued at around $87 billion. Why is Uber worth so much? I would think that ...
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5answers
1k views

Why don't Burgers cost 5 cents?

In this blog post, economist Bob Murphy raises a puzzle involving the principle that in a competitive market, the price equals the marginal cost: There’s a general principle from intro to ...
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1answer
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What is the difference between Herfindahl Index and the Concentration Ratio

I was recently reading about the Herfindahl Index and from what I've learned so far, is that HHI is preferred over the Concentration Ratio. However, I didn't quite understand the reasoning that lead ...
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80 views

A high store loyalty indicates what kind of competition among cement retailers selling products of the same brand?

To provide some context, this question occurred to me while I was considering the cement retail market. If one considers retailers selling cement of only one brand, then the concept of brand loyalty ...
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45 views

Existence of a competition

Is there any theorem or a set of criteria that can prove whether in a given market there will be any sort of competition?
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428 views

Why wouldn't competition prevent “usurious” payday loan rates?

The current Wiki page on "Payday Loans" claims loans are priced above marginal cost. The justification is that If a lender chooses to innovate and reduce cost to borrowers in order to secure a ...
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1answer
158 views

Monopolistic and Bertrand (Nash) Competition

Can we view the monopolistic competition equilibrium (a la Dixit-Stigliz) as the limit case of a Bertrand competition with an infinite number of firms providing differentiated products, where the ...
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74 views

Forming of consumption habits in dynamic equilibrium model?

I just have a question, if you know an example where the consumers form a habit about their consumption in a perfect competition setup. I found this paper by Fuhrer, but it does not solve the it in a ...
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68 views

Competition vs. cooperation [closed]

Why has competition evolved to be the leading principle of market based economies? Can this sustain in the long run? I am thinking about cooperation as a better principle of doing things in the long ...
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117 views

Fuel trading a market with near-perfect competition

Can I classify the fuel trading market (wholesalers buying and selling fuel by phone) as a market with near-perfect competition? It is a market with many sellers and buyers, the product is ...
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1answer
127 views

Why do all apartment complexes in Albuquerque have pools?

Apartment builders have a constrained optimization problem whereby they balance building different amenities to attract tenants with varying preferences. Recently when searching for apartments I ...
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1answer
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Benefits of a cartel among firms

Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\...
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1answer
88 views

Perfect competition profits question

Market is supplied by: 50 competitive companies all of them have relatively low costs given by an equation $C_l(q)=350+2q+q^2$ and by n companies of higher costs given by an equation $C_h(q)=400+2q+q^...
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861 views

Perfect competition questions

I have problems with deciding whether those statements are true or false. In a short/long run price of equilibrium on a perfectly compettive market might be either lower or higher then average total ...
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3k views

Why is collective bargaining by a group of employees not the same thing as price-fixing?

Employees sell their labor for wages. If a critical mass of employees get together and demand higher wages, how is this not the same thing as a critical mass of merchants illegally fixing the price of ...
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Decreasing consumption prices and increasing housing prices

It's election time in my country. The government boasts a decrease of 5% in consumption prices thanks to removing regulations, while the opposition blames the government for an increase of 5% in ...
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4answers
953 views

Is net neutrality not important in a competitive market of internet providers?

In my understanding, allowing ISP to throttle sites that use a lot of traffic is just price discrimination. The ISP will charge sites like Netflix, which will then pass the cost to Netflix consumers. ...

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