AGENDA Mon 3/5

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AGENDA Mon 3/5 Tues 3/6

• QOD 19 Stupid is as stupid does.
• Review Quiz
• Review HW
• Taste Tests
• Monopolistic Competition
• Oligopoly
• Luke, I am your father!
• HW pg 189 1-5 pg 195 1-5
• Study for Market Org Quiz
• Stock Market Company Analysis Summary Sheets
  Printout 1

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QOD 19 Stupid is as stupid does.

• As you watch the clip from Forest Gump, note
  the process related to Bubba Gump Shrimps
  position in the shrimping market.
• Before the hurricane, how does the shrimping
  industry resemble a perfectly competitive market?
• How does the hurricane change the market price
  and quantity of shrimp? (Use supply demand
  graphs to illustrate.)
• How did the hurricane create a monopoly for Bubba
  Gump Shrimp? Use the characteristics of a
  monopoly to support your answer.
• Do you think Forest can maintain his monopoly
  status over time? (In other words, are there
  barriers to entry?) Explain.

3
Taste Tests

• Your task is to analyze each of the products to
  determine which is the brand name item.
• In your team, SHARE some of each of the crackers
  (A B)
• Also, examine the plastic sandwich bags (A B).
  
• Finally, examine each of the paper towels (A
  B).
• Consider texture, color, and taste.
• Last, select which of the two products (A or B)
  would be the higher priced item.

4
Results of Price Check

• Product A

• Product B

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Monopolistic Competition

• The Characteristics of Monopolistic Competition
• there are many buyers and many sellers
• firms produce and sell slightly differentiated
  products
• there is easy entry into and exit from the market
• Price searchers
• sell slightly different products
• produce Q when MR MC
• sell at the highest price at which they can sell
  all of their output

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How are Monopolistic Competitors products
different?

• the product itself may actually or appear to be
  different in some way
• Differ by location, service or perceived quality
• Location gas station / convenience
• Service Nordstrom / Supercuts
• Perceived quality Hamburgers / Clothing

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Competitors and Monopoly

• Many businesses would like to become a monopoly
• they advertise perceived differences
• Competition depends on two factors
• How close to unique the product is
• How easy it is for sellers to enter the market

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AGENDA Wed 3/7 Thurs 3/8

• Review HW (pg 189 1-5 pg 195 1-5)
• Oligopoly
• Luke, I am your father!
• HW pg 198 1-15 RQ
• Study for Market Org Quiz
• Stock Market Watch

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Sec 4 - Oligopoly

• The Characteristics of an Oligopoly
• there are few sellers
• firms produce and sell either identical or
  slightly differentiated products
• there are significant barriers to entry into the
  market
• oligopolies are price searchers
• face intense competition from current sellers
• barriers prevent competition from new sellers

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Identifying Oligopoly Industries

• Economist determine whether a market is an
  oligopoly by looking at the percentage of sales
  accounted for by the top four firms in the
  industry
• 6 major film studios 90 of revenue
• 20th century, Warner Brothers, Paramount,
  Columbia, Universal, Walt Disney
• Dreamworks (Viacom boughtowned by Paramount)
• 2008 became independent again but distributed by
  Disney
• Leading Indies Lionsgate, Summit Entertainment,
  MGM (former Biggie!)
• 4 music companies 80 of revenue
• Sony, EMI, Universal, Warner
• 6 book publishers
• 3 television networks (1950-1970)
• ABC/Disney
• CBS
• NBC Universal
• 2 added since
• Time Warner
• News Corporation (FOX)
• Rule of 3 (markets often become an oligopoly of
  3)? Orwells 1984
• Food processors Kraft, Nestle, PepsiCo

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Luke, I am your father.
12
Cartels

• A cartel is a group of business that get together
  to eliminate or reduce the competition they face
  from each other.
• A cartel agreement is an agreement that
  coordinates group activities to reduce
  competition and raise profits
• cartels are weak because there is a strong
  monetary incentive to violate the agreement
• eg OPEC

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Who is in Competition?

• It may appear that buyers and sellers are in
  competition with each other
• The real competition, however, is between sellers
  for buyers
• The threat of competition from other sellers ends
  with sellers aligning with buyers
• ex brand devotion