I finished a-levels 3 years ago but I thought I’d come back and watch a few videos because these were the sole reason I got a B in Economics. Great content! 👍
@EconplusDal How can there be homogenous goods if one of the assumptions is differentiated goods? You made the point that homogenous goods is a factor promoting competition.
if the good is homogenous then firms are more likely to be price takers as there is a higher availability of substitutes meaning consumers can easily switch to other brands (this makes firms more likely to compete on price), however if the goods are differentiated then firms can charge a higher price compared to their competitors due to brand loyalty (the idea that consumers will be prepared to pay more for their product)
If the product has a low PED (relatively inelastic) and is relatively unique in the market it is in (or at least not homogeneous), firms will naturally be able to set prices higher. Elasticity is the key factor and can be a good evaluation point. If consumers feel that they need it, they will buy it no matter what the price, allowing the firm to be a price-maker.
Sir, it seemed to be quite hard for me to understand why collusion can protect the market share when prices are set high? This confuses me with merger. Thank you
One of the factors promoting competitive oligopoly is one firm with significant cost advantage. Wouldn't this just lead to price leadership which is under collusive oligopoly? What's the difference between the two?
if one firm has significant cost benefits they can undercut all other firms, and still hold profits. so that firm with cost advantages would not want to collude as they would be better off undercutting.
So, I have a question. By stating that a more "diffuse" or "less concentrated" oligopoly would opt not to collude due to the points you have suggested aren't you going against the main principle of what it means for there to be an oligopoly: A small number of large firms? I mean, is this assumption necessary to argue for when there would be competition within an oligopoly or could you also argue for firms competing within an oligopoly that only has a few number of firms? Still a great video raising the key points :) thanks a lot
a oligopoly can usually have up to 7 firms with over 70% concentration ratio, it is unlikely and difficult for all these firms to collude meaning if one firm doesnt sign they could undercut etc
But isn’t the fact that goods are homogenous actually one of the reasons that firms are more likely to collude and fix prices? If the goods or services are identical or very similar, their costs might therefore also be similar, which can make it easier for firms to coordinate and agree on a common price that benefits all of them. And is the reason that homogenous goods will less likely lead to a collusive market, because they have no market power to fix prices or is it because it reduces the probability of cheating in a collusion since they have little or no brand loyalty? Because, do firms necessarily need market power in order to collude?, cus consumers can’t buy from another firm anyway, since they all have increased their price to the same price, so what do they need the market power for?
When evaluating the monopoly u said there may be diseconomies of scale as a con but as a pro you said there are economies of scale, which is correct ??
Both are correct! A monopoly may be too large and operating at such a scale which increases their long-run average costs e.g. communication and coordination problems. This means that they would experience diseconomies of scale at that point in time. However, if they are operating at minimum efficient scale, they will be benefitting from economies of scale at the lowest point of the ATC curve. That is my understanding of the topic area but I'm no avid economist so ask your teacher if you still don't get it!
because monopoly and oligopoly are quite similar. the only main difference is that a monopoly is 1 dominant firm but a oligopoly has multiple firms. :)
At first, before collusion, oligopolies are competive markets where firms are fighting between each other trying to gain market share etc. After collusion takes place you can almost think of the firms in the collusion as one large firm gaining monopoly power. However, the monopoly power is actually split between the firms in the agreement. This monopoly power can come in the form of supernormal profits, dynamic efficency etc. Though it also comes with the cons of monopoly power, through effects on consumers of high price, low quantity and deadweight welfare loss of CS.
@@hasansyed692 I don't think so no, because he is saying there is no incentive to cheat as even if they undercut the initial collusive agreement, there is no guarantee that they attract more customers and increase their own market share ( because of brand loyalty etc) So they may as well both collude and gain SNP as there is no incentive to cheat. ygm?
I'm a bit late, but firms can be fined and sanctioned if they are found to have engaged in collusive behaviour. Individual executives and managerial roles who played role in the collusive behaviour can also be punished individually through threats of criminal prosecution.
You Sir, are the only reason i haven't ended my life before my econ exam tomorrow.
😂😂😂
how'd it go?
@@UTK37 10 daysssssss
@@Sm.sm2005 6 bruh
@@samuela775 5 actually
you should be an avenger
the hero we simply don't deserve
you out here saving lives dal
saving lives 5 years later!
I finished a-levels 3 years ago but I thought I’d come back and watch a few videos because these were the sole reason I got a B in Economics. Great content! 👍
I’ll make mine an A* , thanks for the review
@@jxpan246 I swear to god , I got an A* in economics , these techniques are legit and according to Cambridge . Please follow these to success
@@userxp7055 less goooo, I'll make mine an A* as well
Touch grass
@@userxp7055 Congrats, hope I can match that lol
i just love ur expalaination sir, have great respect for u, thanks alot
Thank you for your best videos!
Thank you sir. You make Microeconomics easy.
I love how he tells us how to evaluate the two types of oligopoly
dalllll. amazing stuff my man.
this is so helpful
simply the best
I am extremely thankful for you. Thank you.
Where were you before my exam??? My text book was Shit!!!
very good, thanks a lot
you are the best!
We love you daddy dal
@EconplusDal How can there be homogenous goods if one of the assumptions is differentiated goods? You made the point that homogenous goods is a factor promoting competition.
I think you just need to trust the goat bud.
mobile data provider like EE
👏🏽 thankyou sir.. today am having exam
YU ARE AWESOME SO EDUCATIVE
Great!!
Sir please turn on the lights
L comment
Guys how does the type of good (e.g. homogenous) affect your ability to set prices (i.e. being a price taker or maker)?
Point number 4?
if the good is homogenous then firms are more likely to be price takers as there is a higher availability of substitutes meaning consumers can easily switch to other brands (this makes firms more likely to compete on price), however if the goods are differentiated then firms can charge a higher price compared to their competitors due to brand loyalty (the idea that consumers will be prepared to pay more for their product)
If the product has a low PED (relatively inelastic) and is relatively unique in the market it is in (or at least not homogeneous), firms will naturally be able to set prices higher. Elasticity is the key factor and can be a good evaluation point. If consumers feel that they need it, they will buy it no matter what the price, allowing the firm to be a price-maker.
Sir, it seemed to be quite hard for me to understand why collusion can protect the market share when prices are set high? This confuses me with merger. Thank you
One of the factors promoting competitive oligopoly is one firm with significant cost advantage. Wouldn't this just lead to price leadership which is under collusive oligopoly? What's the difference between the two?
if one firm has significant cost benefits they can undercut all other firms, and still hold profits. so that firm with cost advantages would not want to collude as they would be better off undercutting.
So, I have a question. By stating that a more "diffuse" or "less concentrated" oligopoly would opt not to collude due to the points you have suggested aren't you going against the main principle of what it means for there to be an oligopoly: A small number of large firms? I mean, is this assumption necessary to argue for when there would be competition within an oligopoly or could you also argue for firms competing within an oligopoly that only has a few number of firms?
Still a great video raising the key points :) thanks a lot
a oligopoly can usually have up to 7 firms with over 70% concentration ratio, it is unlikely and difficult for all these firms to collude meaning if one firm doesnt sign they could undercut etc
Which diagram would you draw when you evaluate competitive oligopolies?
Is it kinked demand curve and kinked mr with normal MC and AC?
@@KIRAN5P 3 years on and it's still a great question
diagram moving towards competitive outcomes
@@BT-zh9bq bruv u forgot to say a diagram
maybe monopolistic?
Thank you
COLLUDE
But isn’t the fact that goods are homogenous actually one of the reasons that firms are more likely to collude and fix prices? If the goods or services are identical or very similar, their costs might therefore also be similar, which can make it easier for firms to coordinate and agree on a common price that benefits all of them.
And is the reason that homogenous goods will less likely lead to a collusive market, because they have no market power to fix prices or is it because it reduces the probability of cheating in a collusion since they have little or no brand loyalty? Because, do firms necessarily need market power in order to collude?, cus consumers can’t buy from another firm anyway, since they all have increased their price to the same price, so what do they need the market power for?
@econplusdal are u saying that are allocatively and productively efficient? But on the diagram they arent
When evaluating the monopoly u said there may be diseconomies of scale as a con but as a pro you said there are economies of scale, which is correct ??
Both are correct! A monopoly may be too large and operating at such a scale which increases their long-run average costs e.g. communication and coordination problems. This means that they would experience diseconomies of scale at that point in time. However, if they are operating at minimum efficient scale, they will be benefitting from economies of scale at the lowest point of the ATC curve. That is my understanding of the topic area but I'm no avid economist so ask your teacher if you still don't get it!
Who's here due to their economics exam today ?
🐐
twust on that
I dont get how you can evaluate oligopoly with monopoly? wth! can someone explain please!!
because monopoly and oligopoly are quite similar. the only main difference is that a monopoly is 1 dominant firm but a oligopoly has multiple firms. :)
At first, before collusion, oligopolies are competive markets where firms are fighting between each other trying to gain market share etc. After collusion takes place you can almost think of the firms in the collusion as one large firm gaining monopoly power. However, the monopoly power is actually split between the firms in the agreement. This monopoly power can come in the form of supernormal profits, dynamic efficency etc. Though it also comes with the cons of monopoly power, through effects on consumers of high price, low quantity and deadweight welfare loss of CS.
@@elliottkeeble6448 different topic, but uno the 'link to cheating' points, how would that promote collusive oligopoly, wouldn't it do the opposite?
@@hasansyed692 I don't think so no, because he is saying there is no incentive to cheat as even if they undercut the initial collusive agreement, there is no guarantee that they attract more customers and increase their own market share ( because of brand loyalty etc) So they may as well both collude and gain SNP as there is no incentive to cheat. ygm?
What regulation can be used to stop Collusion?
@Muhammad ali Soomro
Isn't that a merge and not collusion?
@Muhammad ali Soomro This is completely wrong clown, that's a merger, and it was already blocked.
I'm a bit late, but firms can be fined and sanctioned if they are found to have engaged in collusive behaviour. Individual executives and managerial roles who played role in the collusive behaviour can also be punished individually through threats of criminal prosecution.
Covert?
no its overt collusion, tacit is basically covert
Could we use the argument that cartels can provide lower prices than competitive market due to economies of scale?????
are exam boards oligopolist just tryna profit maximise?
one could argue there are other objectives of exam boards, perhaps they may be more allocatively efficient due to their motives.
2.11
L video
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