The US automobile industry is a good example of an oligopoly. It consists mainly of three major firms, General Motors (GM), Ford, and Chrysler. The influence of this oligopoly can be seen in the prices and the development and introduction of new car models into the American car market. Extensive work has been done on the field of collusive behaviour in the US automobile market and moreover the introduction of the small car in the 1950s shows how the firms collude when it comes to the introduction of a new car.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- The Price Leader in the Oligopoly
- How Prices are determined
- Influences on the Surpluses and Welfare
- Absence of the Bertrand-Nash Equilibrium
- Punishment in the Cartel
- Product Introduction
- Applied Game Theory
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper examines the influence of oligopoly in the US automobile sector on pricing and product development. It aims to identify the price leader within the General Motors, Ford, and Chrysler oligopoly, explain how prices are determined, and analyze the absence of a Bertrand-Nash Equilibrium in this collusive market. The paper further explores the mechanisms by which the cartel punishes price-cheating members and investigates the underlying decisions behind the introduction of new car models.
- Price leadership and price following dynamics within the US automobile oligopoly
- Collusive pricing behavior and its impact on consumer and producer surplus
- Absence of a Bertrand-Nash Equilibrium due to collusive pricing
- Punishment mechanisms employed by the cartel to deter price-cheating
- Game theory applied to the decision-making process of introducing new car models
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction establishes the context of the US automobile industry as an oligopoly and highlights the significance of this market structure for pricing and product development. The paper then delves into the identification of the price leader within the oligopoly, focusing on General Motors' role as the dominant price setter. The subsequent section explores how prices are determined in this collusive market, contrasting the oligopolistic approach with perfect competition. This section also examines the impact of collusive pricing on consumer and producer surplus. The paper then analyzes why a Bertrand-Nash Equilibrium is absent in this oligopoly due to the collusive nature of pricing decisions. Further, it investigates how the cartel punishes members who deviate from the agreed-upon prices, illustrating the dynamics of enforcement within the oligopoly. Finally, the paper examines the decision-making process behind the introduction of new car models, applying game theory to understand the strategic considerations involved.
Schlüsselwörter (Keywords)
Oligopoly, US automobile industry, price leadership, collusive pricing, Bertrand-Nash Equilibrium, cartel, punishment, product introduction, game theory.
- Citar trabajo
- Ricardo Falter (Autor), 2010, The effects of oligopoly in the US Automobile sector on pricing and development, Múnich, GRIN Verlag, https://www.grin.com/document/175388
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