#1
i need some help with an assignment

what would the effect be on the overall economy if a major bank in an oligopolistic market structure became a monopoly?

what would the effect be on price stability and unemployment ?

so far all i have is that the other banks would go broke, loss of jobs etc.
and that the new bank would be able to charge consumers more...

help please?
Last edited by ralph wiggum at Nov 1, 2008,
#2
You should have added, "and English?"

...modes and scales are still useless.


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#3
Stability would be up!
Eventually prices would return to slightly above what they had been. The only way to become monopolized would be if they had undercut the other banks with either better service or prices. So we can assume that prices are still close to what they were. There would be little or no loss of jobs. Once this bank becomes a monopoly it has to expand. look at walmart! its everywhere, employing 2% of america's workforce or something like that
#5
i dont see anything wrong with it

if you want to be a pedantic about full stops and capitals i really dont care
#6
Quote by captaincrunk
Stability would be up!
Eventually prices would return to slightly above what they had been. The only way to become monopolized would be if they had undercut the other banks with either better service or prices. So we can assume that prices are still close to what they were. There would be little or no loss of jobs. Once this bank becomes a monopoly it has to expand. look at walmart! its everywhere, employing 2% of america's workforce or something like that



alright thanks man
thats given me some stuff to write about

btw im arguing that if one bank was to take over another, that would eventually lead to a monopoly, because the smaller banks would no longer be able to compete with this new larger one.

Edit- sorry for double post
#7
Ahh economics.....the bane of my existence.....stupid mofo teacher making us difficult assignments.....


well if the bank became a monopoly, it would control the whole market for that area, prices would go up for preety much everything. Unemployment would increase i guess.... but eh its too early for me to think of stuff like that =P

you wouldnt happen to know anything about the port of brisbane would ya? (doing that for my assingment now)
#8
Quote by ralph wiggum
i dont see anything wrong with it

"who out their studies english"

...modes and scales are still useless.


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#10
Quote by Xiaoxi
"who out their studies english"


last time i checked....we all did?


edit: *sigh* nvm....i fail lol
#11
Quote by ralph wiggum
alright thanks man
thats given me some stuff to write about

btw im arguing that if one bank was to take over another, that would eventually lead to a monopoly, because the smaller banks would no longer be able to compete with this new larger one.

Edit- sorry for double post

If one bank merges with another (unless it was trough warfare? lol) Other banks would start merging in an attempt to stop this. As this happened prices would drop, but unemployment would go down

Services provided and quality would go down because of the concern for size, and because you need less quality when you have more customers, less ervices = less employees, but also more banks pop up to drive out small banks. More locations = more customers = more workers

Prices would drop because a large bank does not fear price war with a small bank, even a multitude of small banks can't provide corporate size loans.
#13
Quote by A8039077
...

No, YOU.


...modes and scales are still useless.


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#14
Quote by ralph wiggum
i need some help with an assignment

what would the effect be on the overall economy if a major bank in an oligopolistic market structure became a monopoly?

what would the effect be on price stability and unemployment ?

so far all i have is that the other banks would go broke, loss of jobs etc.
and that the new bank would be able to charge consumers more...

help please?

Well for a start no regulator would let that happen, ever.

The bank would set a monopoly price which is greater than Cournot or Bertrand oligopoly prices. The effect of this is higher fees and higher interest rates (the banks wouldn't compete on interest rates). It would make borrowing more expensive which would reduce growth and increase unemployment. It would be a hard monopoly to maintain.

Interestingly, for a market of firms n>=3 competing in Cournot oligopoly the merger of two firms will not occur and the merger of n>2 firms is unlikely as these mergers will reduce the firms' profits.

All in all it's a very unrealistic scenario...
Quote by captaincrunk
Stability would be up!
Eventually prices would return to slightly above what they had been. The only way to become monopolized would be if they had undercut the other banks with either better service or prices. So we can assume that prices are still close to what they were. There would be little or no loss of jobs. Once this bank becomes a monopoly it has to expand. look at walmart! its everywhere, employing 2% of america's workforce or something like that

If the firms were competing in Bertrand competition (undercutting each others' prices) to the point were all but one firm was left in the market that firm would be able to set a monopoly price. The monopolist who is left would be more efficient than the firms that were in the market or potential entrants (this is the only way it can survive as a sole firm in Bertrand competition). Potential entrants would know in advance that if they entered the market they would compete in Bertrand and that and, as is the case here, they could not sustain it, therefore they would not enter. The monopolist would be free to set a monopoly price as it knows no other firm will be willing to enter - once the other firms have been forced out there is no reason for the monopolist to set any price other than the monopoly price.
Last edited by Kiwi Ace at Nov 2, 2008,