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Improving understanding of collusion in intermediate microeconomics

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  • Evan Moore

    () (Auburn University at Montgomery)

Abstract

Standard treatments of collusion in intermediate microeconomics textbooks frequently involve a Cournot duopoly facing linear demand with constant marginal costs of production. These presentations leave students with the misunderstanding that firms jointly behaving like a single-firm monopolist and profit maximising collusion are one and the same. We present a simple and effective way for improving student comprehension of collusion; this exercise results in collusion where the duopolists produce more total output than that of a monopolist while enjoying greater joint profits. The exercise can be used to clarify and lead to a better understanding of collusion and profit maximisation.

Suggested Citation

  • Evan Moore, 2011. "Improving understanding of collusion in intermediate microeconomics," International Review of Economic Education, Economics Network, University of Bristol, vol. 10(1), pages 3-13.
  • Handle: RePEc:che:ireepp:v:10:y:2011:i:1:p:3-13
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    File URL: http://economicsnetwork.ac.uk/iree/v10n1/moore.pdf
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    1. Dieter Balkenborg & Todd Kaplan & Timothy Miller, 2011. "Teaching Bank Runs with Classroom Experiments," The Journal of Economic Education, Taylor & Francis Journals, vol. 42(3), pages 224-242, July.
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