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Questions tagged [oligopoly]

Questions about markets where the number of sellers is finite and larger than one.

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1 answer
63 views

Stackelberg model with 3 symmetric firms

Firm 1, the incumbent, sets quantity q1 first, then firm 2 enters the market and sets quantity q2, knowing q1. Lastly, firm 2 enters the market and sets quantity q3, knowing q1 and q2. Firms are ...
0 votes
0 answers
22 views

Long Run Model of Oligopolies After Recession

I am currently investigating about the long run impact of the COVID 19 to the US airline industry. Is there any specific (long-run) model that I can use for oligopolies (for 4 main companies)? Because ...
1 vote
1 answer
111 views

Underlying assumptions of Bertrand competition

Q1. Under the lists of assumptions for Bertrand model it is mentioned in last that the following are intuitively deducible when considering the law of demand of firms' competition in the market: If ...
1 vote
1 answer
110 views

For which number of firms in a Cournot oligopily a merger is profitable

Assume a Cournot oligopoly with N (equal to 2 or higher) symmetric firms. Firms face a demand function P=a-bQ and an average cost c. I need to find the number of firms N for which it will be ...
1 vote
0 answers
42 views

On Cournot question

In a duopoly market, the market demand function is $y(p) = 120-p$ where $y=y_1+y_2$ Total function of firm 1 is $C_1(y_1)=20y_1$ while the reaction function of firm 2 is $y_2= 60-0.5y_1$. Assume that ...
2 votes
1 answer
58 views

How do the assumptions $p'+q_ip''<0$ and $p'-c''<0$ ensure the stability of the Nash equilibrium among private firms in basic mixed oligopoly model?

I have two quick question regarding basic oligopoly models: What is meant by we impose the assumptions to $p'+q_ip''<0$ and $p'-c''<0$ to ensure the stability of the Nash equilibrium among ...
1 vote
2 answers
256 views

how does monopolisitic competition make profit in the long run in reality

guys, I have this doubt that if the fast food industry such as KFC, and Maccas are examples of monopolistic competition how are they still making a profit? Because as per the model in long run the ...
3 votes
0 answers
396 views

How to solve the Bertrand model when marginal costs are different and not constant?

Find the equilibrium in the Bertrand model with two firms, with total costs given by: $TC_1(q_1) = \alpha q_{1}^2$ $TC_2(q_2) = \beta q_{2}^2$ Inverse demand is given by $P = A - Q$, where $Q = q_1 + ...
3 votes
2 answers
1k views

How does market work when there are few buyers and few sellers at the same market?

If I understand it right, correct term for such situation is bilateral oligopoly.
3 votes
1 answer
96 views

Cournot Duopoly firms guaranteed to produce the same amount

If a market is given to be a Cuornot duopoly and Q = q1 + q2. What assumptions can you make about q1 and q2 being equal? Is it possible for q1 > q2 and thus for company 1 to have greater market ...
3 votes
1 answer
139 views

Math behind the first mover advantage in Stackelberg model

Suppose the market demand is $P(Q) = a-bQ$ and the manufacturing cost of an item is $c_1q_1$ for firm $1$ and $c_2q_2$ for firm $2$. In the Cournot model, we maximize the profit functions and plug in ...
1 vote
1 answer
587 views

Why is the Cournot equilibrium price more than competitive price?

Why is the Cournot competition price more than the perfectly competitive price? My intuition tells me that since the quantity is less than what would've been the case in a perfect competition, so the ...
0 votes
1 answer
43 views

Doesn't it make sense in terms of economic security for tech companies to support unions?

It seems to me looking across (modern) history that the biggest threat to monopoly is government intervention. It certainly seems true in present times when you have many politicians on the left ...
1 vote
2 answers
141 views

Why wouldn't other firms follow suit if an individual firm decides to cut its price?

Why doesn't the demand curve an individual firm faces in a perfectly competitive market have the same elasticity as it does in a oligopolistic market? Under perfect competition, if a firm increases ...
0 votes
0 answers
43 views

How useful are basic economics (elasticity / consumer & producer theory) in real life?

I am thinking how these concepts will be applied in the industries / at a job. For example I could see elasticity as useful in projecting the outcomes of supply ...
2 votes
1 answer
371 views

Realistic examples of quantity competition

In microeconomic models of oligopolies we consider price competition and quantity competition (think Cournot, Bertrand, Stackelberg). I can easily imagine price competition where a producer sets the ...
22 votes
4 answers
6k views

Why would a company sabotage its product's ability to be used for a particular purpose?

I saw in the news recently that NVIDIA has placed limits on the hash rate for mining Ethereum cryptocurrency. This is purportedly to get more GPUs into the hands of gamers instead of crypto miners. ...
1 vote
1 answer
516 views

Profit maximization of an oligopolistic firm

I have some serious doubts between A and B. On one hand, given that each oligopolistic firm follows the same profit maximization rule as that of a monopolistic one, it's the basic rule of MR = MC, and ...
1 vote
1 answer
178 views

Will there always be excess profit in the Cournot model equilibrium/monopoly

So I'm studying market structures for the end of term, and I'm a bit confused about excess profits. From what I can see, excess profits occur when the demand curve intersects the AC curve - the MR=MC ...
0 votes
0 answers
129 views

Sequential and simultaneous price competition

Frims 1 (leader) and 2 (follower) compete in price with product differentiation • Find the equilibrium price, quantity and profit when they choose price simultaneously and sequentially. q1=100-10p1+...
2 votes
1 answer
613 views

Uniform price vs. pay-as-bid auctions in energy markets

These two types of auctions are most commonly used in the energy trading markets. What would be advantages and disadvantages of each? And in the end, can we expect them to deliver similar outcome? One,...
4 votes
1 answer
186 views

Equilibrium with substitute goods

I am attempting to solve the following problem The demand functions for two substitute goods, the production cost of which equals $c_1$ and $c_2$, are $q_1 = a_1 + b_{11}p_1 + b_{12}p_2$ and $q_2 = ...
3 votes
1 answer
159 views

Perfect Bayesian Equilibrium in a two stage game with incomplete information

I would like to solve a game where firms have private information about their own type, but only know the distribution of the other firm's type. They interact in two stages, where the strategies ...
5 votes
2 answers
519 views

Cournot oligopoly - first-order condition

I am reading an article that has this description of the first-order condition for a Cournot n-firm game: Take $P(Q) = Q^{-1}$, $\pi_i(q_i, Q) = (Q^{-1} - c_i)q_i$. Then the first-order condition for ...
3 votes
1 answer
551 views

Duopoly vs Collusion (quadratic costs)

Suppose there are 2 firms; Demand curve is given by $P=1400 - 5(q_1+q_2)$ and cost function is given by $C_i = 5q_i^2$. For cournot, the best response function comes out to be $q_i=70 - 0.25q_j$ ...
1 vote
1 answer
556 views

Non Collusive Cournot Duopoly model with two firms, zero costs and linear demand curve

I am reading Modern Microeconomics by Koutsoyiannis. In a Non Collusive Cournot Duopoly model with two firms, zero costs and linear demand curve. Firm A produces half the total market demand to ...
1 vote
1 answer
91 views

Is there any research, theory, or anything which shows how much of a market has to be in power of a few companies to be a force against free market?

According to Free market a free market is a system in which the prices for goods and services are determined by the open market and by consumers. In a free market, the laws and forces of supply ...
0 votes
1 answer
617 views

Stackelberg Oligopoly 3 firms [closed]

Imagine that there are 3 firms in a monopolistic market, F1, F2 and F3. Firms 1 and 2 are incumbent firms and act simultaneously whereas Firm 3 observes the actions of both firms before deciding ...
4 votes
2 answers
6k views

Stackelberg with 3 firms

I'm currently trying to solve the following problem: Stackelberg with 3 firms Imagine there are three firms on a monopolistically competitive market. The marginal cost of produc- tion in each ...
8 votes
4 answers
21k views

Nash equilibrium of a Bertrand game with different marginal costs

Consider the following game of Bertrand (price competition): There are two players, $1$ and $2$. Each has a publicly known marginal cost, $c_i$. A strategy is a price, $p_i\in\mathbb{R}$. Player $i$'...
2 votes
1 answer
1k views

How do small firms survive in an oligopoly?

How do small firms survive in an oligopoly if large firms already dominate a huge amount of market share in the market? in terms of the supermarket industry between large supermarkets and small ...
1 vote
1 answer
106 views

Supermarkets industry market structure

If the industry is dominated by a few major large retailers like Walmart and target with thousands of many other small supermarkets around the country, what is the market structure of the industry? is ...
2 votes
1 answer
529 views

Mixed Cournot/Bertrand Duopoly [closed]

I am learning basic Oligopoly models. I know that : In Cournot model firms set output - output is the strategic variable. In Bertrand model firms set prices - price is the strategic variable. ...
1 vote
0 answers
729 views

Will the market for driverless cars move toward a monopoly?

There is a short article in The Economist (link below) where the writer makes the claim that because there are firms the exhibit economies of scale - in driverless technology - they will eventually ...
0 votes
1 answer
3k views

3 Firm Stackelberg's Oligopoly Game

Consider a market in which there are three firms, all producing the same good. Firm i's cost of producing qi units of the good is Ci(qi)=0 for qi≥0 for each i∈{1,2,3}; the price at which output is ...
0 votes
1 answer
822 views

Finding the demand function [closed]

Here is the problem: Suppose that an oligopolist charges a price of 500 and sells 200 units of output per day. If the oligopolist increases its price about 500, quantity demanded will decline by 4 ...
0 votes
1 answer
457 views

Question on oligopoly.

Consider an oligopoly between two identical firms producing a homogenous good with constant marginal cost where firms face linear market demand. $B_i(q_j)$ denotes firm i’s best response given the ...
1 vote
1 answer
354 views

Intuition behind a cournot duopoly nash equilibrium producing a higher output than a monopoly?

I am just wondering if someone could explain the descriptive, not mathematical intuition behind why a cournot equilibrium for a duopoly produces a higher level of output than a monopolist but lower ...
2 votes
1 answer
153 views

How exactly is a Bertrand equilibrium defined?

By 'given the price set by other firm' does this mean the firm knows its competitor's exact output? I had read 3 textbooks, but one describes that they have a precise expectation of what their ...
1 vote
2 answers
15k views

Is the global Automobile Industry changing from an oligopoly to monopolistic competition?

The current situation is the automobile industry is an oligopoly as there are few big firms and massive barriers to entry due to cost. However, The industry seems like it is changing to a monopolist ...
4 votes
2 answers
64 views

Firm Concentration and Low Inflation

Inflation in the advanced economies since the financial crisis has been surprisingly low. Yet at the same time we’re told that the US economy is losing its dynamism in recent decades. This is ...
0 votes
1 answer
64 views

Game Theory of Two Firms

There are only two firms that produce and sell hockey equipment, Abel Corporation (A) and Baker Company (B). They each sponsor special events to try to gain customers. As there are only 2 firms, the ...
2 votes
2 answers
129 views

Studying Oligopolies

I am a very Macro guy, but I need to dive a little in the world of Microeconomics. Specifically, I need to study oligopolies. From the general theory to empirics. Since I do not know the literature, I ...
3 votes
2 answers
2k views

Are market structures on a spectrum?

So I understand that each market structure has their own characteristics, and that for instance Perfect Competition involves high competition, and I believe Monopolistic competition slightly less so, ...
2 votes
1 answer
2k views

Oligopoly kinked demand graph doesn't make a sense to me

Hello, so in class I learned about the kinked demand curve in oligopoly. Our teacher said that under the sticky price, the demand is inelastic. However, I don't understand how the demand can be ...
2 votes
1 answer
76 views

Price when both supply and demand have market power

I have an intermediate sector that operates using labor only. There is 1-1 pairs between firms and workers, with profits $$\pi = (Ap - w)\cdot 1$$ $p$ is the price, $A$ productivity, $w$ wage. ...
4 votes
1 answer
495 views

Adjustment to equilibrium in Cournot model with 2 firms

In pg. 509, of Hal Varian's Intermediate Microeconomics Ch. 27, writer discusses the Cournot equilibrium. In the figure, the reaction curve of firm 1 f1(y2) was steeper than firm 2 f2(y1). When we ...
2 votes
1 answer
167 views

Cournot game with 2 firms

I have given 2 firms in a market with constant marginal costs and no fixed costs market demand has $D(p)$ The firms play a Cournot game I'm supposed to Calculate the equilibrium quantity for each ...
5 votes
3 answers
1k views

Clarification about Market Structure Oligopoly or Monopoly

As per the definition i found in the internet, Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share. Monopoly, where there is only ...
2 votes
1 answer
297 views

Choosing the nondominant strategy in a duopoly

Would a company ever choose a nondominant strategy in a duopoly? Let's take this specific example (2007 AP MicroEcon B #2). Two airlines, Airtouch and Windward, are scheduling flights for either ...