Most of your time in Microeconomics you have spent on the models of competitive markets or oligopolies.
Despite the fact that these models by and large predict well there are also situations and details where they are not appropriate. However, in order to keep them mathematically and analytically tractable, several assumptions have been made. These assumptions are sometimes more and sometimes less correct in reality.
In the following you are asked to discuss the appropriateness of the models we have seen during the skills training.
Your task is to prepare an essay dealing with the following market:
Consumer to consumer trading platforms on the Internet such as Ebay.
Write an essay in which you discuss the appropriateness of different theoretical assumptions. In particular you should address the following questions:
1. To what extent does the market fulfil the assumptions of competitive markets (infinite number of buyers
and sellers, barrier-free entry and exit, perfect information, no transaction costs, homogenous products, traders are profit (utility) maximisers)? To what extent is the market monopolistic or oligopolistic?
2. To what extent does the market suffer from asymmetric information? And what has been done to
downsize the problem?
3. Do you think that in this market a maximum of welfare is reached? Why or why not? If not, what could be done to increase welfare?
4. Given your answers above, is there a necessity for more, less regulation? What would you do?
Details on the procedure are:
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