Welcome to the Welcome to the Cartel!Cartel!

An Exercise in Economic Analysis

Market Demand for Wiper Blades

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

600 700 800 900 1000 1100 1200 1300 1400 1500 1600

Quantity Demanded

Pri

ce TR = $11,000TR = $11,000

TR = $13,500TR = $13,500

Small Firms:

Economic Profit = $4*150 = $600

ATC - Tiger

$0

$5

$10

$15

$20

$25

$30

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

Small Firms:

Economic Profit = $3*200 = $600

ATC - SuperTech

$0

$5

$10

$15

$20

$25

$30

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

Big Firms:

ATC - Vulture

$0

$5

$10

$15

$20

$25

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

Economic Profit = $4*350 = $1400

Big Firms:

Economic Profit = $2*400 = $800

ATC - Zynadine

$0

$5

$10

$15

$20

$25

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

Industry Economic Profit = $3400

Cartel Results – BlueBlue (sec. #8)

Price = $xx Quantity = xxx Total Profit = $xxx$xxx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

Cartel Results – GreenGreen (sec. #8)

Price = $xx Quantity = xxx Total Profit = $xx$xx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

Cartel Results – YellowYellow (sec. #8)

Price = $xx Quantity = xxx Total Profit = $xx$xx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

A Better Way . . .• SuperTech produces 250SuperTech produces 250• Tiger produces 225Tiger produces 225• Vulture produces 425 each . . .Vulture produces 425 each . . .• Have Zynadine shut down!!!!Have Zynadine shut down!!!!

• Price = $15; ATC = $5 • Total Econ profit = $9000

. . . split up in some way each finds equitable

Welcome to the Welcome to the Cartel!Cartel!

An Exercise in Economic Analysis

A Better Way . . .ATC - SuperTech

$0

$5

$10

$15

$20

$25

$30

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

ATC - Tiger

$0

$5

$10

$15

$20

$25

$30

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

ATC - Zynadine

$0

$5

$10

$15

$20

$25

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

ATC - Vulture

$0

$5

$10

$15

$20

$25

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800

Cartel Results – BlueBlue (sec. #9)

Price = $xx Quantity = xxx Total Profit = $xxxx$xxxx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

Cartel Results – GreenGreen (sec. #9)

Price = $xx Quantity = xxx Total Profit = $xxx$xxx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

Cartel Results – YellowYellow (sec. #9)

Price = $xx Quantity = xxx Total Profit = $xxx$xxx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

Cartel Results – BlueBlue (sec. #10)

Price = $xx Quantity = xxx Total Profit = $xxxx$xxxx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

Cartel Results – GreenGreen (sec. #10)

Price = $xx Quantity = xxx Total Profit = $xx$xx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx

Cartel Results – YellowYellow (sec. #10)

Price = $xx Quantity = xxx Total Profit = $xx$xx

Quota: Econ. Profit: Gain:

Tiger xxx $xxx $xxx

SuperTech xxx $xx $xxx

Vulture xxx $xx $xxx

Zynadine xxx $xx $xxx