2016-03-19 18:53
Economies of scope are said to be presented whenever it is less costly to produce a set of goods in one firm than it is to produce it in two or more firms. For the two-product case, this amo… Read More
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industrial organization notes
2016-03-19 18:53
The Ray Average Costs (RAC) are defined as total costs divided by q. That is, RAC(q) = C(rq,(1-r)q)/q where q1=rq, q2=(1-r)q and r is the proportion in which product 1 is produced. We… Read More
2016-03-19 18:53
Suppose that instead of a C(q) cost function, we have a C(q1,q2) cost function. This new function represents the cost of a firm that produces q1 units of product 1 and q2 units of product 2… Read More
2016-03-19 18:53
The firm is said to have economies of scale if its average cost falls as output increases. But if average cost rises with output, the firm is said to have diseconomies of scale. Finally, if… Read More
2006-04-07 10:00
According to the Horizontal Merger Guidelines that the U.S. Department of Justice and the Federal Trade Commission issued in 1992 (revised in 1997), concentration is measured using the HHI… Read More
2006-03-24 16:06
HHI = ∑ Si. Si as it equals the sum of the squared market shares of each firm in the industry. (See Friday, March 10, 2006) = -ε. (∑ Si. Si )/(-ε) (multiply and divi… Read More
2006-03-24 15:08
An oligopoly consists of n identical firms that produce a homogeneous product. The firm 1 chooses its output q1 to maximize its profits (All the firms do the same). So we have Π1 = p(Q).q… Read More
2006-03-17 13:39
The most common measures of industry concentration are the CR4, CR8 and HHI. The four-firm Concentration Ratio (CR4) is the share of industry sales accounted for by the four largest firms. T… Read More
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