Nuwal appears to be lively today. Slow start.
1:15. Some indications we’ll actually be starting class soon.
In order to discriminate prices, a seller must have monopoly power, to some degree.
A monopolist has less ability to set prices in a highly elastic market. In an inelastic market, a monopolist can set relatively higher prices without the quantity demanded dropping so low as to reduce profit.
A market with imperfect competition is one in which competition exists, but not all conditions of a perfectly competitive market exist. Oligopolies are one type of imperfectly competitive market. The other major type of imperfectly competitive market is characterized by monopolistic competition.
An oligopoly has several characteristics:
- Few firms
- Products can be either homogeneous or differentiated
- Firms are rivals
- Indeterminate demand curve
In an oligopoly, each producer produces a significant portion of the total output of the good or service, and thus has some ability to set price. No single firm can completely dictate prices, however. Oligopolies have independent pricing. Oligopolies may have collusive pricing. An oligopoly market may have a price leader, who no other firm is able to undercut for any length of time.
A market characterized by monopolistic competition exists when a large number of firms exist with necessarily differentiated products. Each firm has monopoly power over its own product, but the products, while different, compete with each other. Characteristics of a monopolistically competitive market:
- Many firms and many sellers
- Differentiated products
- Substitute products
- Advertising exists, pushing individual firms’ products
- No collusive pricing
- Brand names are important