Production — Games 1 Monopolistic Competition Monopolistic competition arises when there are a large number of price-setting firms in an industry with free entry. Suppose there are n firms. In the short run, each firm faces an nth of the market demand curve
Endowments and Allocations Consider first the case of a pure exchange economy. (One with no production). Suppose there are two consumers, A and B, in a two good economy. A starts with an endowment of ωA =
A consumption externality is a situation where a consumer cares directly about another agent’s consumption or production of a particular good. An externality can be positive or negative: 1. Negative: Loud mobile phone use in public places. 2. Positive: Pipe smoking in enclosed public places
There are two countries, Home (H) and Foreign (F). There are two goods, units of wine (Qw) and cheese (Qc). Suppose there is one factor of production, labour, which is available in amounts L and L