📖 市场结构综合复习

Economics

I. Lesson Focus

This review lesson systematically integrates the four market structures—perfect competition, monopolistic competition, oligopoly, and monopoly. Candidates must be able to identify each structure from given characteristics, apply the universal MR = MC profit-maximization rule, compare long-run equilibrium outcomes, calculate efficiency losses, Lerner indices, and deadweight loss, and analyze strategic behavior in oligopoly using game theory, cartels, Cournot, and kinked demand models. The focus is on cross-structure comparison and numerical application rather than isolated definitions.

II. The Problem

A firm operates businesses in several industries simultaneously: one with countless identical competitors, another with only a few rivals and high barriers, and a third where it is the sole provider of an essential product. Management needs to determine optimal pricing strategy, whether positive economic profit can persist in the long run, the magnitude of consumer surplus loss, and potential government antitrust responses for each business. CFA exams frequently require candidates to classify a market from data, compute the Lerner index, compare social welfare across structures, and evaluate cartel stability, price leadership, or prisoners’ dilemma outcomes in oligopoly. This lesson provides the integrated framework and tools to solve these real-world and exam problems.

III. The Four Basic Market Structures and Their Characteristics

Market structure is determined by four key dimensions: number of sellers, degree of product differentiation, height of entry barriers, and the firm’s control over price.

• Perfect Competition: Extremely large number of sellers, homogeneous products, no barriers to entry, firms are price takers. The demand curve facing each firm is perfectly elastic (horizontal). Short-run profit maximization occurs where P = MR = MC. In the long run, economic profit is driven to zero.
• Monopolistic Competition: Many sellers, differentiated products, relatively low barriers to entry. Short-run economic profits are possible; long-run entry shifts each firm’s demand curve left until P = ATC (zero economic profit). However, P > MC and firms operate with excess capacity.
• Oligopoly: Few sellers, products may be homogeneous or differentiated, high barriers to entry. Firms’ decisions are interdependent. Possible behaviors include cartels, price leadership, game-theoretic outcomes (prisoners’ dilemma), Cournot, Stackelberg, and Bertrand models. Positive economic profit can persist in the long run.
• Monopoly: Single seller, no close substitutes, extremely high barriers to entry. The firm is a price maker. MR lies below the downward-sloping demand curve. Profit maximization still occurs at MR = MC. Positive economic profit can be sustained indefinitely, creating significant deadweight loss.

IV. Unified Profit-Maximization Condition and Differences in Supply Curves

In all market structures, firms maximize profit by setting MR = MC. The relationship between marginal revenue and price, however, differs dramatically:

• Perfect competition: MR = P; the firm’s short-run supply curve is the portion of its MC curve above minimum AVC.
• Monopolistic competition and monopoly: MR < P; the MR curve lies below the demand curve.
• Oligopoly: The MR curve may be discontinuous or kinked due to anticipated rival reactions (kinked demand curve model).

Long-run outcomes also differ: - Perfect competition and monopolistic competition: economic profit equals zero (P = ATC). - Oligopoly and monopoly: positive economic profit (P > ATC) can persist because of high entry barriers.

V. Efficiency and Welfare Analysis

• Allocative Efficiency: Achieved when P = MC. Only perfect competition reaches this in long-run equilibrium. Monopolistic competition, oligopoly, and monopoly produce where P > MC.
• Productive Efficiency: Achieved when P = minimum ATC. Perfect competition attains this; monopolistic competition operates on the falling portion of ATC (excess capacity); monopoly and oligopoly usually do not produce at minimum ATC.
• Consumer Surplus (CS) and Producer Surplus (PS): Perfect competition maximizes CS and total surplus with zero deadweight loss. Monopoly transfers substantial CS to PS and creates deadweight loss.
• Lerner Index: A direct measure of market power, given by $L = \frac{P - MC}{P}$. It equals zero under perfect competition and approaches 1 under monopoly. It is also equal to $-\frac{1}{E_d}$.

VI. Typical Oligopoly Models

1. Cartel: Firms collude to act as a monopolist, jointly setting output and price (example: OPEC). Instability arises from the incentive to cheat (prisoners’ dilemma).
2. Price Leadership: A dominant firm sets the price; smaller firms follow.
3. Cournot Model: Firms simultaneously choose quantities, each assuming rivals’ output is fixed.
4. Stackelberg Model: The leader chooses quantity first; followers react.
5. Kinked Demand Curve Model: Explains price rigidity in oligopoly—rivals match price cuts but ignore price increases.

Worked Cases

Case 1: Long-Run Equilibrium in Perfect Competition

In a perfectly competitive industry the market price is currently 15. A typical firm has MC = 5 + 0.5Q and ATC = 10 + 0.25Q + 75/Q. Find the long-run equilibrium output per firm and economic profit.

Solution:
Long-run equilibrium requires P = MR = MC = minimum ATC.
Set MC = 15: 5 + 0.5Q = 15 → Q = 20.
ATC(20) = 10 + 5 + 3.75 = 18.75 > 15, so firms incur short-run losses.
Firms exit, raising price until it equals minimum ATC. Solving MC = ATC yields Q = 30, P = 20. Economic profit = 0.

Case 2: Monopoly Lerner Index and Deadweight Loss

A monopolist faces demand P = 100 – 2Q and MC = 20 + Q. Calculate the profit-maximizing price and output, the Lerner index, and the deadweight loss relative to the perfectly competitive outcome.

Solution:
MR = 100 – 4Q = MC → 100 – 20 = 5Q → Q = 16, P = 100 – 32 = 68.
Lerner index = (68 – 36)/68 = 32/68 ≈ 0.47.
Competitive equilibrium: 100 – 2Q = 20 + Q → Q ≈ 26.67, P ≈ 46.67.
Deadweight loss = ½ × (68 – 46.67) × (26.67 – 16) ≈ ½ × 21.33 × 10.67 ≈ 113.8.

Case 3: Cartel versus Cournot Duopoly

Two identical oligopolists face market demand P = 80 – 0.5(Q₁ + Q₂) and MC = 20 each.
(a) If they form a cartel (joint monopoly), find total output, price, and profit per firm.
(b) If they compete à la Cournot, find each firm’s output, price, and profit.

Solution:
(a) Cartel: MR = 80 – Q = 20 → Q = 60, P = 50. Each produces 30, profit per firm = (50 – 20) × 30 = 900.
(b) Cournot: Reaction function Q₁ = 60 – 0.5Q₂. Symmetric solution Q₁ = Q₂ ≈ 26.67, total Q ≈ 53.33, P ≈ 53.33. Profit per firm ≈ (53.33 – 20) × 26.67 ≈ 890.

Traps

Key Formulas

• Universal profit-max condition: $MR = MC$
• Lerner Index: $L = \frac{P - MC}{P} = -\frac{1}{E_d}$
• Perfect competition long run: $P = MR = MC = \text{minimum ATC}$, economic profit = 0
• Monopolistic competition long run: $P = ATC > MC$, excess capacity exists
• Monopoly pricing relation: $MR = P\left(1 + \frac{1}{E_d}\right)$
• Cartel approximates monopoly outcome
• Cournot duopoly (linear demand P = A – bQ, constant MC = c): each firm’s output = $\frac{A - c}{3b}$
• Deadweight loss (DWL): $\frac{1}{2} \times \Delta P \times \Delta Q$

Practice Questions

Q1. In which market structure does the firm’s demand curve coincide with the industry demand curve?
A. Perfect competition
B. Monopolistic competition
C. Oligopoly
D. Monopoly

Q2. Which market structure exhibits excess capacity in long-run equilibrium?
A. Perfect competition
B. Monopolistic competition
C. Monopoly
D. Oligopoly

Q3. A firm has MR = 40 and P = 60. Its Lerner index is closest to:
A. 0.25
B. 0.33
C. 0.50
D. 0.67

Q4. In perfect competition, a firm’s short-run supply curve is:
A. Its ATC curve
B. The portion of its MC curve above minimum AVC
C. Its MR curve
D. The market demand curve

Q5. The fundamental reason cartels tend to be unstable is:
A. Low entry barriers
B. Members’ incentive to cheat by overproducing
C. High product differentiation
D. Inelastic market demand

Q6. Compared with perfect competition, monopoly results in:
A. Higher consumer surplus and lower producer surplus
B. A transfer of consumer surplus to producers plus deadweight loss
C. An increase in total social surplus
D. Improved allocative efficiency

Q7. Price rigidity in an oligopoly is most likely explained by:
A. A kinked demand curve
B. Perfect price leadership
C. Bertrand competition
D. Perfect competition pressure

Q8. Which market structures can sustain positive economic profit in the long run?
A. Perfect competition and monopolistic competition
B. Oligopoly and monopoly
C. Monopoly only
D. All four structures

Answers

Takeaways

• The four market structures are distinguished primarily by number of sellers, product differentiation, entry barriers, and degree of pricing power.
• MR = MC is the universal profit-maximization rule, but the MR–P relationship determines the extent of market power.
• Perfect competition achieves both allocative and productive efficiency with zero long-run economic profit; monopolistic competition reaches zero profit but with excess capacity.
• Oligopoly behavior depends heavily on rivals’ reactions; Cournot, cartel, price leadership, and kinked demand are essential models.
• The Lerner index directly quantifies market power and is inversely related to demand elasticity.
• Monopoly and imperfect competition generate deadweight loss; perfect competition is the welfare-maximizing benchmark.