AGENDA Thurs 3/9 & Fri 3/10 • QOD # 21: Health Insurance Rates

• Review HW (pg 189 #1-5; pg 195 #1-5)

• Oligopoly

• “Luke, I am your father!”

• Team Time:Progress Status

• HW:; pg 198 #1-15 RQ; CH 7 GC Notes

– Study for Market Org Quiz 3/13

– Business Plan or Stock Selection DUE 3/13

– Team Unit Project #2: DUE 3/20

QOD #21: Health Insurance Rates

• What are the major companies that are merging?

• Will the mergers result in higher health insurance

costs? Why? Draw a market graph to support your

answer.

• How has the Affordable Health Care act impacted

health insurance rates?

• How are mergers in pharmaceutical companies

related?

• What predictions can you make about the future of

the health care industry?

Sec 4 - Oligopoly • The Characteristics of an Oligopoly

1. there are few sellers

2. firms produce and sell either identical or slightly

differentiated products

3. there are significant barriers to entry into the market

4. oligopolies are price searchers

– face intense competition from current sellers

– barriers prevent competition from new sellers

Identifying Oligopoly Industries • Economist determine whether a market is an oligopoly by looking at

the percentage of sales accounted for by the top four firms in the industry – 6 major film studios = 90% of revenue

• 20th century, Warner Brothers, Paramount, Columbia, Universal, Walt Disney

• Dreamworks (Viacom bought—owned by Paramount) – 2008 became independent again but distributed by Disney

• Leading Indies: Lionsgate, Summit Entertainment, MGM (former Biggie!)

– 4 music companies = 80% of revenue • Sony, EMI, Universal, Warner

– 6 book publishers

– 3 television networks (1950-1970) • ABC/Disney

• CBS

• NBC Universal

• 2 added since – Time Warner

– News Corporation (FOX)

• Rule of 3 (markets often become an oligopoly of 3)→ Orwell’s 1984 – Food processors: Kraft, Nestle, PepsiCo

Identifying Oligopoly Industries • Economist determine whether a market is an oligopoly by looking at

the percentage of sales accounted for by the top four firms in the industry

• Auto Makers

• Smart Phone Market

• Mentions of Carriers

• Airlines

Cartels • A cartel is a group of business that get together to

eliminate or reduce the competition they face from

each other.

• A cartel agreement is an agreement that coordinates

group activities to reduce competition and raise

profits

• cartels are weak because there is a strong monetary

incentive to violate the agreement

– eg: OPEC

Who is in Competition?

• It may appear that buyers and sellers are in

competition with each other

• The real competition, however, is between sellers

for buyers

• The threat of competition from other sellers ends

with sellers aligning with buyers

– ex: brand devotion

“Luke, I am your father.”