17 votes

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

Limiting the hash rate is maximizing the demand for their product. Historically, gamers have been crucial to Nvidia's success. Their demands drive innovation, and they're the ones willing to spend ...
user avatar
  • 289
12 votes
Accepted

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

This topic is explained by market segmentation with price discrimination in monopolies. This is widely used in, for example, price discounts for senior/retired people. By targetting different market ...
user avatar
9 votes
Accepted

Nash equilibrium of a Bertrand game with different marginal costs

Yes, there is no equilibrium in pure strategies. For any price charged by firm 2 above $c_1$, firm one could only best respond by charging the largest price that is strictly smaller. which is ...
user avatar
8 votes

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

Disclaimer: I am not at all familiar with the hardware industry; in fact I believe this answer makes most of my points but is better tailored for the specific industry in question. Market share A ...
user avatar
  • 26.1k
6 votes

How do small firms survive in an oligopoly?

When there are few big firms and many smaller firms with a small market share, economists speak about a market with a competitive fringe. The smaller firms are price takers, have higher marginal and ...
user avatar
  • 2,542
6 votes

Nash equilibrium of a Bertrand game with different marginal costs

It is my impression that this has been formalized under the $\varepsilon$-equilibrium concept ("epsilon-equilibrium"). It is even called "approximate-Nash" equilibrium. Shamelessly copying from the ...
user avatar
4 votes

A market correction for an industry which has had long-run negative externalities

An aspect of the matter could be described as follows: We want prompt replacement of (existing) fixed capital because, I guess, it creates currently "unacceptable" levels of negative externalities,...
user avatar
4 votes
Accepted

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?

The quote in the question isn't really rigorous about what a free market is, but it talks about monopolies and artificial scarcities, so I am interpreting the efficient outcome with price equal to ...
user avatar
  • 16.6k
3 votes

Firm Concentration and Low Inflation

Interesting! A possible way to resolve this contradiction is by taking cost reducing technologies into consideration. Perhaps (example with made up numbers follows) in 1960 a gallon of milk cost \$1 ...
user avatar
  • 26.1k
3 votes

How exactly is a Bertrand equilibrium defined?

What do we mean by "makes the best decision based on what the other player has decided to do" Your question touches a little bit on the philosophical foundations for Nash Equilibrium. As you know, a ...
user avatar
  • 16.6k
3 votes
Accepted

Studying Oligopolies

The basics are of course Cournot, Stackelberg and Bertrand competition, which you can find in any textbook. If you are referring to needing references for research, then the paper you absolutely must ...
user avatar
  • 5,404
3 votes

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

As the graph notes, the red segment of the demand curve is relatively inelastic, meaning that compared to the blue segment, the red segment of demand is relatively insensitive to price changes. This ...
user avatar
  • 14.3k
3 votes

In which market structure does the consumer has almost zero knowledge about the good?

The market for lemons. Paper is here. The example most commonly given is used cars. The result is market failure.
user avatar
3 votes

When a demand function is split, how do we algebraically change function

The Bertrand case you mention is a little special because it induces a discontinuity in the demand function. Suppose that market demand is $D(P)=1-P$, zero marginal cost, and that all consumers buy ...
user avatar
  • 16.6k
3 votes

Clarification about Market Structure Oligopoly or Monopoly

This market is an oligopoly that is subject to government regulation. It cannot be a monopoly because there is more than one firm. The presence of the regulating government body is a "red herring", ...
user avatar
3 votes
Accepted

Adjustment to equilibrium in Cournot model with 2 firms

The trick is to draw the whole reaction function—including the part that coincides with the axis. Hopefully these figures make it clear:
user avatar
  • 16.6k
3 votes

Perfect Bayesian Equilibrium in a two stage game with incomplete information

In your example, you would still use backward induction to solve for the Perfect Bayesian Equilibrium (assuming the distribution of private costs has full support). In fact, the second stage of your ...
user avatar
  • 14.3k
3 votes

Cournot oligopoly - first-order condition

The gist/shortened and generalized version of the above answer: In the context where $Q = \sum_i q_i$ the equation $$ \frac{\partial \pi_i}{\partial q_i} + \frac{\partial \pi_i}{\partial Q} = \frac{\...
user avatar
  • 26.1k
3 votes
Accepted

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

I believe "Auctions of Homogeneous Goods: A Case for Pay-as-Bid" by Pycia and Woodward answers your questions theoretically. This is quite recent and their results are striking. They also ...
user avatar
  • 5,090
3 votes

Profit maximization of an oligopolistic firm

This is Sweezy's (1939) kinked demand curve model. In equilibrium, quantity is at F and price at A. I guess the answer B results from a misconception. The profit maximization equation MR = MC ...
user avatar
  • 4,527
2 votes

Clarification about Market Structure Oligopoly or Monopoly

There is a sense of differentiation thus this is not competitive market clearly. Government regulations in an industry cannot be regarded as a monopoly as government mostly will decide on a price ...
user avatar
  • 1,066
2 votes

Studying Oligopolies

I would recommend taking a look at Jean Tirole's "The Theory of Industrial Organization". This textbook provides a clean exposition of the models of Bertrand, Cournot, Stackelberg, Hotelling, and ...
user avatar
  • 16.6k
2 votes
Accepted

Choosing the nondominant strategy in a duopoly

It seems you interpret the game as a sequential game. If Windward would know that its move was observed by Airtouch it would act as you say. But this is not the case, they move simultaneously, and it ...
user avatar
  • 26.1k
2 votes

Nash equilibrium of a Bertrand game with different marginal costs

I think standard in Bertrand competition with different constant marginal cost is another assumption in case of equal prices. Instead of sharing demand equally, you could assume that in case of equal ...
user avatar
  • 5,090
2 votes
Accepted

3 Firm Stackelberg's Oligopoly Game

I assume that you found Firm 3's best response to be \begin{equation} q_3^*(q_1,q_2)=\frac12(16-q_1-q_2). \end{equation} The next step would be to solve for Firm 2's best response. Since Firm 2 ...
user avatar
  • 14.3k
2 votes

Finding the demand function

I don't have a question to "correctly interpret" , but I think the way you are calculating the demand function is correct. The demand curve in an oligopoly can be kinked (bowed out), as this one is. I ...
user avatar
  • 1,200
2 votes
Accepted

Question on oligopoly.

You have solved the Cournot part correctly, but then you've gone completely off the road, by mistaking economics for mathematics. This usually happens. First of all, you shouldn't assume just any ...
user avatar
2 votes

Realistic examples of quantity competition

You can't differentiate empirically between Bertrand and Cournot oligopoly/duopoly just by looking whether quantity or price varies. In both Cournot and Bertrand model price can change. The difference ...
user avatar
  • 41.6k
1 vote

Stackelberg Oligopoly 3 firms

You are right that you first have to find F3's best-response function. F1 and F2 take as given this reaction of F3 to whatever they produce. Hence, you plug this best-response function into the ...
user avatar
  • 5,090

Only top scored, non community-wiki answers of a minimum length are eligible