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Questions tagged [monopolistic-competition]

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Government companies providing products at-cost

Many products are dominated by oligopolies. For example Boeing and Airbus control most of the jetliner market. There have been and are various degrees of nationalization in which a government takes ...
Kevin Kostlan's user avatar
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1 answer
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A monopolist has decreasing average costs, setting the price equal to AC will lead to?

1)what will happen to the Output compared to the situation where MR=MC ? 2)what will happen to the Output compare to Competitive Output? Attempt at Soln. : 1) 2) so definitely quantity of o/t for ...
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Are there any examples of companies prioritizing market dominance or intellectual property ownership over long-term profitability?

I want to know if market dominance (total share of a market's profits) is more important than long-term profitability because psychologists believe that humans and other animals have a social ...
Jude Zambarakji's user avatar
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1 answer
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What is max here, and how did they derive the first order condition from it?

Hello. Someone sent this on a discord server that I am on, and I couldn't make heads or tails of this. I found the book it is from on studocu; solutions to Cabral's Industrial Organisations, 2nd Ed. ...
andromeda's user avatar
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2 answers
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how does monopolisitic competition make profit in the long run in reality

guys, I have this doubt that if the fast food industry such as KFC, and Maccas are examples of monopolistic competition how are they still making a profit? Because as per the model in long run the ...
studenthere's user avatar
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1 answer
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Monopolistic competition

I’ve got some questions on economic intuition according to firm behavior in monopolistic competition. Kinda hard to find explanation in the Internet. What is the effect of the fixed costs of ...
Laney's user avatar
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Concentration Ratio - Real Estate Appraisals/Valuations

with reference to "Market Structures", how can you work out whether your industry is operating in an Oligopoly/monopolistic/...-environment if there is insufficient data? I'm specifically ...
AnthonyWDR's user avatar
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1 answer
144 views

Do monopolistic firms indirectly increase prices of products sold by perfectly competitive firms?

Correct me if I'm wrong, but this is my understanding: In perfect competition, firms set the price at the marginal cost of production. This gives them a relatively low amount of profit. In ...
causative's user avatar
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Why does negative derivative of AC with respect to q imply Economies of scale (Monopoly)

In the following Industrial organization exercise form Church and Ware chapter 4 exercise 2 (preliminary info: C(q) = cost function; f = fixed costs; c = marginal costs; q= quantity of goods produced)...
Adriano Pollio's user avatar
3 votes
3 answers
5k views

Why companies choose to make zero economic profits in the long-term when it can maximize it instead? Why does Apple have large profit margins?

I read that companies in the monopolistic competition make zero economic profit in the long term. Why would a company do that when it can maximize the profit instead? My reasoning is that the former ...
Isa's user avatar
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How can I compare surplus in monopolistic competition to surplus in monopoly?

Is there any way to compare the total surplus and consumer/producer surplus in monopolistic competition with that of perfect competition or monopoly? All I can come up with is the idea that deadweight ...
Evan's user avatar
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Will there always be excess profit in the Cournot model equilibrium/monopoly

So I'm studying market structures for the end of term, and I'm a bit confused about excess profits. From what I can see, excess profits occur when the demand curve intersects the AC curve - the MR=MC ...
Evan's user avatar
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Derive and Decompose The Aggregate Elasticity of Substitution in CES Economy

The paper is Oberfield & Raval 2021. Consumers have standard Dixit-Stiglitz preferences consuming the bundle $$Y= \left(\sum_{i \in I} D_{i}^{\frac{1}{\varepsilon}} Y_{i}^{\frac{\varepsilon-1}{\...
Alalalalaki's user avatar
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The Price and Demand Index in Homothetic Kimball Utility

Suppose with Kimball preferences, utility $Q$ from consuming $\left\{q_{\omega}\right\}_{\omega \in \Omega}$ is implicitly given by $$\int_{\omega \in \Omega} Y\left(\frac{q_{\omega}}{Q}\right) d \...
Alalalalaki's user avatar
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Elasticity of substitution of goods in canonical New Keynesian Model

In the context of a New Keynesian Model (NKM) with imperfect competition, the aggregate demand for good can be represented using Dixit-Stiglitz aggregator $$C_t=\Bigg(\sum^1_0C_t(i)^{\varepsilon-1\...
Rei's user avatar
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1 answer
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demand curve shift in a monopolistic competitive market

As more firms enter the market, the quantity demanded at a given price level will thus decline. Therefore, the perceived demand curve for any individual firm will continue to shift leftward until the ...
Underwood's user avatar
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Does a monopolistically competitive market outcome involves assuming rational expectations?

E.g. When Grazzini et al. (2014) discuss a "monopolistically competitive outcome" (MC) in their paper ($2.1), which is based on Dixit-Stiglitz's model, 1977, does this outcome involve assuming ...
Beck Batucada's user avatar
1 vote
1 answer
51 views

What happens to consumer surplus and profits as firms get more information in Hotelling's duopoly model?

In the Duopoly on the line [0,1] with customers uniformly distributed, with firm A on the 0 side and firm B on 1's side, we know that if the firms have no information about the customer, there will be ...
Yejin's user avatar
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1 answer
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Derivation of aggregate demand function for Monopolistic Competition (based on Combes et. al, 2008)

A specialized question for those, who excel in monopolistic competition and modern trade theories. I am interested in a derivation of an aggregate demand function for a model of monopolistic ...
Artem Kochnev's user avatar
4 votes
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Examples of Analysis of Competition in a Latent Product Characteristic Space

Competition between firms offering heterogenous products is often an exercise of constructing the right kind of spatial model. There is the famous Hotelling model and many other papers that model ...
Pburg's user avatar
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4 votes
1 answer
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Concentration Measures

There are several metrics used to identify market power. Such as ... the 'n' concentration ratio (the proportion of overall sales given by the top n firms) and the Herfindhal index. However, there ...
user17789's user avatar
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1 answer
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Have countries with a monopoly on a resource in an area ever established 1-company monopolies in that area to drive up price?

Say its the 18th century and South America wants tea. Britain, for example could have a monopoly on the tea trade in the area. However if multiple British companies sell in the area they will drive ...
DannyH's user avatar
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1 vote
1 answer
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Constant MC - Monopolstic Competition

I would like to know if it is possible to have constant marginal costs (MC) in a business that is operating on a market, that is defined by monopolistic competition? The company is a construction ...
oliverbj's user avatar
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2 answers
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Is the global Automobile Industry changing from an oligopoly to monopolistic competition?

The current situation is the automobile industry is an oligopoly as there are few big firms and massive barriers to entry due to cost. However, The industry seems like it is changing to a monopolist ...
Shane's user avatar
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1 vote
2 answers
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Free market defense against anti-competitive behavior?

One argument against a completely free market economy without "government" oversight is the tendency towards anti-competitive behavior. The argument is that government laws are needed to prevent anti-...
Lassie Fair's user avatar
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1 answer
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Monopoly and competitive output levels

Why do markets that are dominated by a single seller have a tendency to maximize profits at lower levels of output than their competitive counterpart? Why is the competitive market equilibrium price ...
david's user avatar
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3 votes
2 answers
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, ...
Wolff's user avatar
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0 answers
849 views

Cobb-Douglas production function with continuum of goods

I'm trying to derive the solution to a final producer with unit elasticity of substitution and a continuum of inputs (of measure $x$). She minimizes input costs, given an output of $q$. $$ \min_{\{y(...
FooBar's user avatar
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2 answers
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Would you consider airport parking to be a monopoly or a monopolistic market?

If you look at it one way and group the different companies that offer parking, it could be a monopoly as that is the only place you can park. On the other hand, the different companies offer ...
rra117's user avatar
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4 votes
1 answer
571 views

Log-Linearizing a Dixit-Stiglitz function

In a New-Keynesian Model, the Consumption index $C_t=\left(\int_0^1{C_t(i)^{1-\gamma} \ di}\right)^{\frac{1}{1-\gamma}}$ is log-linearized to $\tilde{c_t}=\int_0^1{\tilde{c_t}(i) \ di}$ where ...
Chris tie's user avatar
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3 votes
1 answer
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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 ...
NeoButFemale's user avatar
1 vote
2 answers
122 views

Market behavior when consumer must choose product before knowing price?

What forces influence the price in a market, wherein the consumer must choose a good before knowing the price, and afterwards only knows the price of the good purchased, not that of any competing ...
dnbwise's user avatar
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1 vote
2 answers
137 views

In which market structure does the consumer has almost zero knowledge about the good?

Consider goods that are almost identical (e.g. cement) and require technical knowledge to understand their merit, which an ordinary consumer might not possess. What then is the feature characteristic ...
Shrey Aryan's user avatar
1 vote
0 answers
86 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 ...
Shrey Aryan's user avatar
1 vote
1 answer
80 views

Will there be any competition amongst cement retailers?

If we consider a cement manufaturer in a given country, say India, then will the cement retailers of that companies' product compete with each other? And if so, then what kind of a competition will it ...
Student's user avatar
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0 answers
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What are some ways to add quality to the supply-demand model?

Please excuse me, I hardly know anything about economics yet. When the quality of a product changes, the demand curve moves. But what if there are different versions of a product, of varying ...
Hyperbolic Asker's user avatar