This chapter talks about the competitive behavior of oligopoly enterprises, and directly looks up books and materials.

Enterprise behavior under the condition of complete monopoly

First of all, what is complete monopoly?

If there is only one enterprise in an industry, its products can't be replaced by other products, and there are great obstacles for new enterprises to enter, which will lead to complete monopoly.

Second, the price and output decisions of enterprises under the condition of complete monopoly

The demand curve of the enterprise is the demand curve of the industry, which is inclined to the lower right (that is, the output increases and the price decreases).

Assuming that the enterprise aims to maximize profits, its price and output decisions should be made at MR = MC (the intersection of marginal income curve and marginal cost curve, when the enterprise maximizes profits). From the intersection of MC curve and MR curve, the optimal yield and price can be obtained.

Although it has complete control over the price, the higher the price, the smaller the demand, and the high price may not bring high profits, MR = MC thinks. Under the profit maximization condition of MR = MC, if MC is positive, then MR must be positive, so the determination of optimal price and optimal output must be in the elastic demand stage of demand curve. The marginal cost curve of a monopoly enterprise cannot reflect the relationship between the price of its products and its output, so there is no supply curve of its own.

Three. Market entry barrier

Enterprises control the source of basic raw materials for products; Enterprises have patent rights; The existing enterprises have remarkable scale benefits and large scale; Government charter.

Fourth, the disadvantages of monopoly enterprises.

1. High price

In a perfectly competitive enterprise, the price is set at the lowest point of the average cost curve, and the enterprise can only get normal profits. But in monopoly enterprises, in order to obtain monopoly profits, the price is always higher than the average cost, which harms the interests of consumers.

2. Insufficient output

In a perfectly competitive enterprise, the price is P=MR and P=MC, and from the perspective of rational allocation of social resources, the output is optimal. However, in monopoly enterprises, the demand curve is not horizontal like perfect competition, but inclined to the lower right. When MR=MC, it is obvious that P & gtMC means that products with higher value can be produced with less additional resources, which shows that from the perspective of rational allocation of social resources, the output of enterprises is not optimal, that is, the output of enterprises is insufficient. If we can increase the output, we can provide more benefits for society.

3. Low production efficiency

In a perfectly competitive enterprise, in the long run, the lowest point of the long-term average cost of the enterprise can be the optimal scale; In monopoly enterprises, the maximum profit output of enterprises is not at the lowest point of the long-term average cost curve, which shows that enterprises have failed to choose the optimal scale and economies of scale have not been fully utilized. In addition, because monopoly enterprises have no competitors, lack of competitive pressure, and lack of motivation and enthusiasm to promote technological innovation and strengthen enterprise management, the result is often technological stagnation and lax management, which has been wasting a lot of resources.

On the bright side: the scale is large, so the economies of scale are obvious. The production, sales, procurement, advertising and research and development of products can save costs and offset all or part of the factors of low production efficiency to varying degrees.

V government intervention in monopoly enterprises

1. Formulate and implement the Anti-Monopoly Law (splitting monopoly enterprises, preventing monopoly, preventing mergers that may weaken competition, and preventing collusion).

2. Control natural monopoly enterprises (mainly price control)

Theoretically speaking, the government should let enterprises set the price and output at P=MC, because it is the best from the perspective of rational allocation of social resources. However, because the average cost curve of natural monopoly enterprises leans to the right, its marginal cost is bound to be lower than the average cost, which will result in P.

In practice, more enterprises are allowed to price according to the average cost, that is, according to P=AC. Here, the average cost includes the profit (normal profit) calculated according to the "fair" return on investment. At this time, the output is higher than the profit-maximizing MR=MC, and the social welfare has increased, but it is still lower than P=MC, indicating that the rational allocation of social resources has not yet reached the optimal level.

Enterprise behavior under oligopoly

First, what is oligopoly?

Refers to several large enterprises that produce and sell a large part of the products in the whole industry. In modern society, oligopoly is the most important market model.

Oligopoly can be divided into pure oligopoly and differentiated oligopoly. Pure oligopoly (undifferentiated oligopoly), the products produced and sold by several enterprises in the industry are homogeneous, such as raw materials. There is a different oligopoly, and several enterprises in the industry produce and sell different products, such as design, trademark, packaging and service.

It is characterized by interdependence and mutual influence among enterprises, which can be divided into three modes-tortuous demand curve mode, price leading mode and cartel mode.

Second, the tortuous demand curve model

The characteristic of this model is that if one enterprise raises the price, other enterprises generally will not follow suit, but if one enterprise lowers the price, other enterprises will lower the price.

The demand curve consists of two parts: D 1 and D2, from which we can get the marginal income curves MR 1 and MR2. The marginal income curve composed of these two parts is a broken line. Therefore, under the condition of oligopoly, the competition of enterprises is not mainly through price, but in non-price aspects, including product differentiation and advertising competition.

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