1) Demand is given by P=100-Q/2. Two firms compete according to the Cournot model and each has TC=10q. What profit does each firm earn? How would your answer change if the second firm observed the first firm’s decision (this is the Stackleberg problem)? 2) Demand is given by P=80-2Q. There are three identical firms each with TC=10. Find the profit of a firm if they each pick quantity simultaneously (Cournot). Find the Profit of a firm if the each pick price simultaneously (Bertrand)
Premium Oligopoly American films English-language films
There is only one model for monopoly and one for perfect competition but in contrast to these oligopolies have several models to try to explain how they react‚ examples of these are the kinked demand curve‚ Bertrand and Cournot models. A non competitive oligopoly is ‘a market where a small number of firms act independently but are aware of each others actions’ (Oligopoly‚ Online). In perfect competition no single firm can affect price or quantity this is due to intense competition and the relative
Premium Economics Monopoly Perfect competition
Chai CA(M)‚ CPA‚ CFP‚ MCSM‚ MMIM 1 Oligopolistic concepts/issues: – Duopoly strategic interaction – Cournot Equilibrium – Kinked demand curve – Cartel instability 2 Cournot Model • Interdependence between firms • Max π given what one firm believes the other will produce • Decisions made simultaneously • Firms compete on non-price techniques • Simplest model is a duopoly 3 Numerical example – Duopoly • • • • Assume market demand is represented by: P = 30 – Q where Q = Q1 + Q2
Premium Supply and demand Perfect competition Oligopoly
the price in an oligopolistic market were the firms themselves and therefore based his model on the fact that firms set prices rather than output. (Carlton & Perloff 2005) As with the Cournot model‚ the Bertrand model makes some assumptions. There is no market entry limiting the number of firms to two (duopoly) who produce homogenous products in a single period‚ have the same demand curve and set prices simultaneously. These two non-cooperative firms are also identical in nature‚ have the same
Premium Game theory Economics Competition
P>MC and 0 economic profits deadweight loss Market in which only a few firms compete with one another‚ and entry by new firms is impeded Oligopoly Environment Few Firms‚ MC but lower than monopoly price Market Demand (homogeneous-product‚ duopoly) P=a-b(Q1+Q2) TR(firm1)=aQ1-b((Q1*Q2)-b(Q1)^2 MR(firm1)=a-bQ2-2bQ1 MR(firm2)=a-bQ1-2bQ2 Therefore‚ each firms MR depends on its own and its rivals output Find firm’s Best-response function‚ MR=MC a-bQ2-2bQ1=MC1 Q1=((a-Mc1)/2b)-(Q2/2) Similarily
Premium Supply and demand Economics Inverse demand function
arises through the presence of barriers to entry. Augustin Cournot introduced one of the earliest models in 1838. He considered a ‘duopoly‚’ an industry with two firms. These two firms produce homogenous products‚ allowing
Premium Cartel Oligopoly Economics
Lions did relocate‚ and cut average ticket prices to the Cournot competitive levels. The Pistons’ demand function is given by: QP = 200 - 6PP + 2PL‚ while that of the Lions is given by: QL = 150 + 2PP - 5PL‚ where Q is thousands of patrons per week‚ and P is the average ticket price. a) Draw up a payoff matrix determining the revenue that the two teams made at their original locations‚ and when one or both were to relocate and charge the Cournot competitive price. b) What price would maximize the
Premium Economics Marketing Supply and demand
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
Premium Economics Oligopoly Supply and demand
Market structures and pricing Revenues Consumers * Inverse demand curve gives willingness-to-pay * Benefit consumer(s) derive(s) from additional good; * Area under inverse demand curve measures total willingness-to-pay‚ total benefit or total surplus. * Maximum price I can charge as producer determined by inverse demand function * Marginal revenues; revenue of next unit I sell Strategies * Profit maximization * Marginal profits equal to 0 (MR=MC) *
Premium Economics Monopoly Perfect competition
investment‚ an investor is likely to get a higher rate of return in the stock market by investing in monopolistic rather than competitive industries. 9. A Stackelberg leader will necessarily make at least as much profit as he would if he acted as a Cournot oligopolist. 10. Dominant strategy equilibrium is a set of choices such that each player’s choices are optimal regardless of what the other players choose. II Fill in the blanks for the following questions:（2points*10） 1) Your budget constraint
Premium Marginal cost Cost Economics