Re: Nike

[DORR@xxxxxxx]

Since Tom W's last msg, Paul Phillips and David Laibman have responded with
two good explanations concerning the lack of price reductions in the face of
huge drops in costs.  Together, they explain a lot.  The oligopoly maintains
its product differentiation thru very expensive advertising ( which creates
a barrier to entry), they agree on a limit pricing strategy (Laibman's idea),
and behaving like a good oligopoly, they face a kinked demand curve.  We
should remember that in our classes and textbooks we draw that model with
the lower piece of the MR above the quantity axis, but in the real world,
there is no guarantee that it is.  If it isn't,  then huge drops in both
marginal and average costs will not force a change in price.

Doug Orr
dorr@xxxxxxx