Economia de Mercado Monopoly
Transcript of Economia de Mercado Monopoly
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Monopoly/Market Power
Economía de Mercado
Profesor Ricardo Pasquini
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Review of
Monopoly
Theory
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Market Power
Sustainability
• This cannot be a long run equilibrium
• There must
be
barriers
to
entry:
– Governements Regulations
–
Structural barriers:
economies
of
scale
that
lead
to
natural monopoly
– Strategic Behavior. Entry Deterrence: act
strategically to
signal
entrants
that
their
postentry
profits will be negative.
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Government Regulation
• Exclusive rights to produce to the incumbent.
• Monopoly franchises
are
seen
in
teleccomunications, public utilities like gas, sewer, water, etc
• Reasons why Government grant exclusive franchise:
• Natural Monopoly
• Share a source of revenue / or redistribute the
rents• Intellectual property rights
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Government Regulation
• http://chequeado.com/el‐explicador/como‐
funciona‐el
‐negocio
‐del
‐ juego
‐en
‐la
‐argentina/
• http://www.lanacion.com.ar/1895352‐
desconectan‐
182‐
maquinas‐
tragamonedas‐
en‐
los‐casinos‐de‐cristobal‐lopez
• http://www.lanacion.com.ar/1895423‐
aprueban‐un
‐nuevo
‐reglamento
‐para
‐los
‐
operadores‐virtuales‐de‐telefonia‐movil
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Structural barriers
• Economies of Scale. The entrant requires a
significant Market
share
in
order
to
be
competitive
•
Sunk
expenditures
to
the
entrant.
If
they
anticipate that sunk costs will not be recovered
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A Dominant Firm with Competitive
Fringe Model
• Monopolies are hard to find in real life. Much
more common
are
“near
monopolies”.
Firms
that
have market share close to 100%, and a bunch of
firms competing for the remaining market
• Why can
this
happen?
• The dominant firm is more efficient than its rivals
and as a result enjoys a significant cost advantage.
• The dominant firm has a superior product.
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A Dominant Firm with Competitive
Fringe Model
• The elasticity of market demand.
• The elasticity of supply of the fringe.
• Market shares
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A Dominant Firm with Competitive
Fringe Model
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Durable Goods
Monopoly
• A durable consumer good is a good which
provides a stream
of
sustained
consumption
services: it can be used more than once.
• Land, Films, music, diamonds,.. But also useful
to think of why there are incentive to create
non‐durable goods.
• Think of
an
extreme
example
of
a good
that
lasts forever. Assume supply is fixed
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Durable
Goods
Monopoly
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Durable Goods Monopoly‐ Two period
decision
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Durable Goods
Monopoly
• The monopolist has incentives to lower the
prive over time.
• What about if consumers act strategically?
–
Those who value the good close to
P1,
have anincentive to wait!
– Consumers have a discount factor.. How many of
them will buy today will depend on the relativeimpatience.
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• Consumers at, and close to, the margin have an
incentive to
wait
and
not
pay
the
high
price
today, but the expected lower price tomorrow. If they do this, however, the demand curve will shift inwards in the first period, forcing the monopolist to charge lower prices in the first period!!
• The ability of consumers to arbitrage across periods
restricts
the
ability
of
the
monopolist
to
engage in intertemporal price discrimination.
Durable Goods
Monopoly
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• What will happen if the consumers are
extremely patient?
Or if price adjustments are expected very frequently?
• Consumers thus expect a low price “fast” and
they can
wait
without
incurring
much
cost.
• This makes the demand curve perfectly elastic (horizontal) at P = Pc, eliminating the market
power of
the
monopolist
and
transforming
it
into a price taker!!!
Durable Goods
–Extreme
Case
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• The monopolist has incentives to make his
most effort in communicating consumers that
the Price of the good will not fall.
• Strategies ocurring in the real world:
• Leasing:
• Prior to 1953, the United Shoe Machinery
Corporation–with a market
share
of
between
75% and 85%—had a lease‐only policy.
Durable Goods
–Implications
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• The monopolist has incentives to make his
most effort in communicating consumers that
the Price of the good will not fall.
• Strategies ocurring in the real world:
• Leasing:
• Prior to 1953, the United Shoe Machinery
Corporation–with a market
share
of
between
75% and 85%—had a lease‐only policy.
Durable Goods
–Implications
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• Prior to 1956 IBM had a similar policy for its
mainframe computers.
• Prior to 1975 Xerox also followed a lease‐only
policy for its photocopiers.
Durable Goods
–Implications
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Leasing como instrumento financiero
en Argentina
• En Argentina actualmente existe una ley de
leasing.
• A diferencia del leasing directo de las compañías
monopólicas que vimos, en Argentina el contrato
funciona entre
tres
partes:
i)
el
vendedor
del
bien
durable, ii) un banco que compra y financia a un
usuario, y iii) un usuario que paga un derecho de
uso al
banco.
Además
el
usuario
tiene
una
opción
de compra.
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Leasing como instrumento financiero
en Argentina
• El contrato busca dar una posibilidad de
financiar a usuarios
que
no
tienen
capital
el
capital suficiente.
• La teoría nos dice que el banco, al ser el que
compra, podría tener incentivos a esperar…
pero el vendedor no podrá evitar perder
poder
algo
de
poder
monopólico.
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Leasing como instrumento financiero
en Argentina
• ¿Qué productos se adquiere mediante este sistema? La demanda se divide en:
•
Equipos
de transporte,
logística
y
automotores
(58%)• Equipamiento industrial (14%)• Maquinaria de construcción y agrícola (17%)• Equipos de tecnología y telecomunicaciones (6%)• Otros usos (5%).
• El sector industrial es el principal tomador de esta línea crediticia,
acaparando el 41% del
volumen
de
mercado.
• Luego le siguen el sector agrícola (37%), el de servicios (15%) y construcción (7%), según datos de la Asociación de Leasing de Argentina.
"Los camiones y vehículos pesados son lo más demandados (35%). Le
sigue tecnología
industrial
(25%),
maquinaria
agrícola
y para
la
construcción", afirma Seva.
• Datos de la Asociación argentina de Leasing.
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• With the videocassette recorder revolution–
one in
(almost)
every
home—Disney
had
a
remarkable opportunity to release its classic
animated films, such as Snow White, Bambi, ..
on videocassette.
• But Disney faced the classic conundrum posed
by
the
Coase Conjecture:
How
to
get
consumers to buy today at high prices?
Durable Goods
–Implications
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Disney
• Disney’s strategy was to make the videos
available for
a limited
time
period
and
accompany the release with an advertising campaign in which Disney claimed that the
video would
only
be
available
for
a limited
time period and then never again.
• In its print advertisements they claimed that
“Disney will
stop
selling
Bambi
March
31,
1997.”
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Disney
• This prompted a senior Disney executive to
remark: “Disappearing
Classics
media
campaigns have proven very successful,
boosting sales of limited‐time available
classics in
excess
of
400
percent”
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• The Coase Conjecture states that as the
discount factor
of
consumers
goes
to
1—or
equivalently the time period between price
changes goes to 0—consumers can force the
monopolist to
produce
and
sell
the
competitive amount immediately.
Pacman Economics
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• The Coase Conjecture states that as the discount
factor of
consumers
goes
to
1—or
equivalently
the time period between price changes goes to 0—consumers can force the monopolist to produce and sell the competitive amount immediately.
• The expectations of consumers and the monopolist’s inability to commit not to lower
prices eliminate
the
monopoly
supplier’s
market
power.
Pacman Economics
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• The Coase Conjecture states that as the discount factor of consumers goes to 1—or equivalently the time period between price changes goes to 0—consumers can force the monopolist to produce and sell the competitive amount immediately.
• The expectations
of
consumers
and
the
monopolist’s
inability to commit not to lower prices eliminate the monopoly supplier’s market power.
•
An
alternative
hypothesis
is
that
in
the
limit
as
the
discount factor goes to one the market power of themonopolist becomes perfect!!
Pacman Economics
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Pacman Economics
• Suppose now that the willingness to pay, or
reservation price,
of
the
high
type
(vh)
is
30
and
the reservation price of the low type (vl ) is 10.
• Strategy:
• The monopolist
sets
her
price
at
period
t
equal to
the highest reservation price of any consumer
that has not purchased prior to t .
• Consumers elect to buy as soon as the price is
less than or equal to their reservation prices.
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Pacman Economics
• In the world of Coase, the demand curve is
such that
the
distribution
of
willingness
to
pay
is continuous. In this example there are only
two, there is a gap between reservation
prices.