Oligopoly From Wikipedia‚ the free encyclopedia An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher costs for consumers. [1] With few sellers‚ each oligopolist is likely to be aware of the actions of the others. The decisions of one firm therefore influence and are influenced by the decisions of other firms. Strategic planning by oligopolists
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solution. Due to symmetry‚ each of the firms is producing 12.1.3 Cournot solution. Firstly‚ treat Shell’s quantity as given: (12.) For Caltex to maximize its profit‚ the FOC requires: (12.) Secondly‚ treat Caltex’s quantity as given: For Shell to maximize its profit‚ the FOC requires: (12.) The Cournot-Nash equilibrium is given as: Market output ‚ market price ‚ and firms’ profits are: 12.1.4 Bertrand solution. 12.1.5 Stackelberg solution. Suppose Caltex moves first
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reduced the price of PS3 in July 2007 and even though it was still higher than the Xbox 360‚ Microsoft entered the Bertrand competition being a Baumol type player. The action-reaction sequence continued for 3 iterations and then both the companies switched to Cournot competition revealing their shipments and enticing new customers by releasing new and exciting games. Thus‚ once again the Bertrand competition ended when Nash equilibrium was reached at price
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representative consumer buying a homogeneous good. For example‚ think of the standard Bertrand and Cournot models of oligopoly. Consumers only care about the prices in the market and decide how much of a good to buy and from which firm in order to maximize their utility (given a budget constraint). We know that price competition is fiercer than quantity competition and this result is described by the so called Bertrand Paradox (i.e. in an oligopolistic market for homogeneous goods price competition leads
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TOPIC 1: MARKET STRUCTURE AND MARKET POWER 1.1. Competitors Anyone that produces a substitute for a firm’s product. - Cross price elasticity: Measures the substitution degree of a product for another. P.E.>1 – The demand is elastic‚ a change in price is reflected as an even major change in demand. The extent of the variation is higher as higher is the substitution degree of a product for another. We can say two firms are competing when a price increase by one firm‚ drives its customers to the other
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INTRODUZIONE Le TEORIE DELL’OLIGOPOLIO studiano settori in cui si verificano situazioni intermedie tra le due forme di mercato “pure”‚ CONCORRENZA PERFETTA e MONOPOLIO‚ la cui caratteristica comune‚ che nasce dalla competizione tra un numero limitato di produttori‚ è l’influenza che le scelte di ciascuna impresa determinano sulle scelte delle altre modificandone i profitti; l’analisi in questione consiste quindi nell’attenta ricostruzione dell’interazione che si determina fra tutte le imprese
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Microeconomics Homework Problem 1: C(Q) = 100 + 20Q + 15Q^2 + 10Q^3 a) Fixed Cost (doesn’t change depending on output produced) = 100 b) Variable Cost of producing Q = 10 units: 20*10 + 15*10^2 + 10*10^3 = 200 + 1‚500 + 10‚000 = 11‚700 c) Total Cost of producing Q = 10 units: C(10) = 100 + 20*10 + 15*10^2 + 10*10^3 = 11‚800 Alternatively‚ we have Total Costs of Producing Q=10 units = Fixed Costs + Variable Costs of producing Q = 10 units = 100 + 11‚700 = 11‚800 d)
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Oligopolistic competition * Characteristics of Oligopoly * Similarities & Differences between Monopoly & Oligopoly * Effects of Oligopolistic Competition * Models Defining Oligopoly * Dominant Firm Model * Cournot – nash Model * Bertrand Model * Kinked Demand Curve * Game Theory * Price and Non – Price Competition * Price Leadership * Worldwide examples of Oligopoly * Australia * Canada * United Kingdom * United States * Others
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Practice Problem Sets Industrial Organization Oz Shy General Instructions for Students 1. The problem sets given in this handout are taken from old exams. 2. Exercises should NOT submitted (they will not be graded). However‚ 3. The best‚ and perhaps the only‚ way to ensure that you understand the material taught in class is to solve these exercises under “exam conditions” and only then check the proposed solution. 4. Solutions to all problems can be downloaded as a separate file. 5. Another
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oligopoly : 2. Differentiated products 3. Relatively high barriers to entry 4. Strategic behavior • • is used to study strategic behavior 5. Many models to describe oligopoly • Kinked demand curve • Duopoly : Cournot‚ Stakleberg‚ Bertrand • Price leadership (II) STRATEGIC BEHAVIOR (1) Collusive agreements and Cartels Collusive agreements is defined as an agreement between two or more producers to restrict output in order to raise prices and profits Cartel is
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