Managerial EconomicsManagerial Economics管理经济学讲稿专业班级：信息管理与信息系统大类任课教师：吴如雪教材：Managerial Economics 7th EditionS.Charles MauriceChristopher R.Tomas机械工业出版社CHAP 14.Strategic Decision Making in Oligopoly Markets14.1 Characteristics of oligopolyl Oligopoly is a market structure in which only a few sellers offer similar or identical products. It consists of a few relatively large firms, each with a substantial share of the market and all recognize their mutual interdependence. Mutual interdependence means that the actions of any one firm in the market will have an effect on the sales and revenues of other firms. Each firm knows that its actions or changes will have such an effect and that the other firms will, in response, take actions or make changes that will affect its sales. But no firm is really sure how the other firms will reactthere is an uncertainty about the reaction of rivals to a price change. Common characteristics: (1) The number of firms in an oljgopoly market is small enough that each firm recognizes its mutual interdependence with the other firms. (2) All oligopolies have a certain amount of market power. If an oligopolist raises its price, it generally wont lose all its sales; if it lowers its price, it wont gain the entire market. (3) Oligopoly markets are characterized by some barriers to entry, ranging from moderate to high. Differing characteristics: (1) Oligopolies can be classified by the type of product produced. In some oligopoly markets the products are homogeneous. Other oligopoly markets are characterized by differentiated products. (2) Oligopolies can be Cooperative or noncooperative : Cooperative oligopolists tend to follow changes made by rival firms. Noncooperative oligopolists, on the other hand, do not accommodate such changes. (3 ) Some oligopolistic market are characterized by a great deal of price competition. In others, firms dont compete extensively by price changes but instead compete with their advertising, product quality, and marketing strategies. Four general oligopolistic market structures: (1) A few noncooperative firms producing a homogeneous product, (2) A few noncooperative firms producing related but differentiated products, (3) A few cooperative firms producing a homogeneous product, (4) A few cooperative firms producing related but differentiated products. Because oligopoly markets differ so greatly in their behavior patterns and in their overall characteristic, economists have not been able to develop a single general theory of oligopoly, unlike the case for the other three market structures we have analyzed.l The problem with oligopoly demand: In spite of the uncertainty of rivals to a price change, managers of oligopolies should use the marginal revenuemarginal cost rule when making decisions. This is one of the most important rules of decision making, even when the market is characterized by uncertainty about the reaction of rivals. The problem for an oligopolist is accurately forecasting its demand and marginal revenue if it changes its price. Any change in price and output has a noticeable effect on the sales of other firms. These rivals may react by changing their prices and output, or they may not react at all. In our discussion of oligopoly markets, we will emphasize that the price and output decisions depend critically upon the assumptions made about the behavioral reactions of rival managers. Since many different assumptions can and have been made, many different solutions can and have been reached.14.2 Decision making when rivals make simultaneous decisionsOligopolists are mutual interdependence. Mutual interdependence requires strategic behavior. We cant give a set of rules to follow. The art of making strategic decisions is learned from experience. We can, however, introduce a tool for thinking about strategic decision making.l Game theory provides a useful guideline on how to behave in strategic situations involving interdependence. This theory was developed approximately 50 years ago in order to provide a systematic approach to strategic decision making. A game is any decision-making situation where people compete with each other for the purpose of gaining the greatest individual payoff, rather than group payoff, from playing the game. In the game of oligopoly, the people in the game, often called “players”, are managers of the oligopoly firm. Payoffs in the oligopoly game are the individual profits earned by each firm. Simultaneous decision games occur in oligopoly markets when managers must make their individual decisions without knowing the decisions of their rivals. Decisions dont have to take place at the same time in order to be “simultaneous”.l The prisoners dilemmaa widely known game of simultaneous decision making The story (page 533) Payoff table is a table showing, for every possible combination of decisions players can make, the outcom