Tag: Oligopoly

Marshallian Industrial Districts and the Rise of the Internet

Posted on by Rhys Williams

Recently I attended a Conference for the 40th Anniversary of the Cambridge Journal of Economics where a talk was given on “Industrial Districts, Organisation & Policy”. This article is a summary of some of the discussion from this talk as well as my further thoughts on extending Marshallian Industrial Districts to incorporate the internet.

What is a Marshallian Industrial District?
A Marshallian Industrial District is normally considered a clustering of firms in a similar industry operating from a certain geographic area. Being close to many other firms in the same industry allows a number of benefits, sometimes called benefits of agglomeration or Marshallian atmospheric externalities. [...]

Strategic Pricing

Posted on by Rhys Williams

This article will explore an overview of pricing strategy. We begin by explaining the simple Cournot and Bertrand games, which are game theoretic analyses of a firm’s pricing strategy. With this information we proceed by explaining what strategic complementarities and substitutes are before looking at a paper by Fudenberg and Tirole entitled “The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look”.

Cournot Game
In this scenario we have (at least) two firms who compete on the amount of output they produce, choosing the quantity simultaneously and independently whilst taking the output decision of the other firms as given. [...]

Discuss whether a concentrated market is necessarily anti-competitive

Posted on by Rhys Williams

A concentrated market (one in which there is a high value for the n-concentration ratio) is a market in which there are few firms which possess a relatively large market share. This fulfils one of the criterion of an oligopolistic market.

Because the market consists of only a few firms we may assume that there are economies of scale to be had by producing a large output. Due to this a few large firms will be able to exploit these economies of scale and hence will be operating a lower point on their average cost curve. Due to this they may be able to charge their consumers a lower price and hence may be more competitive than if the market consisted of many firms who couldn’t exploit these economies of scale and hence had higher costs which they had to pass on to consumers in the form of higher prices despite the markets theoretically being more competitive. [...]