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11.1: The principle ideas

  • Page ID
    108417
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    The preceding chapters have explored extreme forms of supply: The monopolist is the sole supplier and possesses as much market power as possible. In contrast, the perfect competitor is small and has no market power whatsoever. He simply accepts the price for his product that is determined in the market by the forces of supply and demand. These are very useful paradigms to explore, but the real world for the most part lies between these extremes. We observe that there are a handful of dominant brewers in Canada who supply more than three quarters of the market, and they are accompanied by numerous micro brewers that form the fringe of the brewing business. We have a small number of air carriers and one of them controls half of the national market. The communications market has just three major suppliers; the Canadian Football League has nine teams and there are just a handful of major hardware/builders' suppliers stores nationally. At the other end of the spectrum we have countless restaurants and fitness centres, but they do not supply exactly the same product to the marketplaces for 'food' or 'health', and so these markets are not perfectly competitive, despite the enormous number of participants.

    In this chapter we will explore three broad topics: First is the relationship between firm behaviour and firm size relative to the whole sector. This comes broadly under the heading of imperfect competition and covers a variety of market forms. Second, we will explore the principle modern ideas in strategic behavior. In a sense all decisions in microeconomics have an element of strategy to them - economic agents aim to attain certain goals and they adopt specific maximizing strategies to attain them. But in this chapter we explore a more specific concept of strategic behavior - one that focuses upon direct interactions between a small number of players in the market place. Third, we explore the principle characteristics of what are termed matching' markets. These are markets where transactions take place without money and involve matching heterogeneous suppliers with heterogeneous buyers.


    This page titled 11.1: The principle ideas is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Douglas Curtis and Ian Irvine (Lyryx) via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.