In oligopoly market every company wants to apply price competition. Use the Bertrandmodel to discuss how can a firm 2 to set the price (P2) of its product (q2). Illustrate thecase by using diagram if you have some information:Demand Q a - b.P, a firm 1 sets price (P1) for its product (q1).

Bertrand contest is a model of rivalry utilized in financial matters, named after Joseph Louis…

in oligopoly market every company wants to apply price competition. Use the Bertrand model to discuss how can a firm 2 to set the price (P2) of its product (q2). llustrate the case by using diagram if you have some information: Demand Q a-b.P, a firm 1 sets price (P1) for its product (q1).

in oligopoly market every company wants to apply price competition. Use the Bertrand model to discuss how can a firm 2 to set the price (P2) of its product (q2). llustrate the case by using diagram if you have some information: Demand Q a-b.P, a firm 1 sets price (P1) for its product (q1).

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 14P

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In oligopoly market every company wants to apply price competition. Use the Bertrand
model to discuss how can a firm 2 to set the price (P2) of its product (q2). Illustrate the
case by using diagram if you have some information:
Demand Q a - b.P, a firm 1 sets price (P1) for its product (q1).

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Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as the prisoner’s dilemma box in Table shows Assuming that both firms know the payoffs, what is the likely outcome in this case?
Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as the prisoner’s dilemma box in Table 10.4 shows. Firm B colludes with Firm A Firm B cheats by selling more output Firm A colludes with Firm B A gets $1,000, B gets $100 A gets $800, B gets $200 Firm A cheats by selling more output A gets $1,050, B gets $50 A gets $500, B gets $20 Table10.4 Assuming that both firms know the payoffs, what is the likely outcome in this case?
The French economist Antoine Cournot developed an interesting model of competition in an oligopoly that now bears his name. In a Cournot oligopoly, all of the firms know that the total output from all firms will determine the price (based on the downward-sloping market demand curve), but they make independent and simultaneous decisions about how much output to produce. Cournot developed this model after observing how a spring water duopoly (two firms) behaved. So let’s look at a duopoly example.For each firm to decide how much to produce, it must make a guess about how much the other firm is going to produce. Also, the firms basically assume that once the other firm has decided how much to produce, it can’t really change its decision.Here’s an example. Suppose the market demand curve for gallons of fresh spring water looks like the one below and, to keep things simple, the marginal cost of spring water is zero. If Firm X believes that Firm Y is going to produce 100 gallons of spring…
Suppose two companies, Apples and Dell, are a competing duopoly. If both companies charge the high price, they each earn $700 million in economic profit. If both companies charge the low price, they each earn $500 million in economic profit. If one company charges a high price and the other a low price, the company charging the higher price earns $450 million in economic profit and the company charging the lower price earns $800 million in economic profit. 1. What is the Nash equilibrium? Select all possible answers from the answer list. 2. Thinking back to your answer for the Nash equilibrium, can firms do better than the outcome you identified? Explain.