Non-competitive markets and elements of game theory
Abstract
The model of a perfectly competitive economy that we analyzed in the previous chapter helped us understand how prices are set on the basis of the law of supply and demand. However, the assumptions that underlie that model are too unrealistic. In this chapter we will study what happens when we abandon the assumption of atomistic behavior. The new category we will consider is market power. Whether we are talking about a monopoly, monopolistic competition, or an oligopoly, it is a fact that, outside a perfectly competitive environment, a company always has some power over other economic agents whose liberty is thus somewhat reduced or actually threatened. The chapter ...
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