In this essay I am going to demonstrate models of oligopoly behaviour and analyse them and see whether they atomic number 18 realistic or not and evaluate them with certain examples where they may be more or less suitable. An oligopoly is a trade which consists of few degenerates which sell similar or homogenized products. In this essay I exit too be looking at a duopoly, which is a mart with both unfluctuatings. The Cournot equilibrium, this is where a pair of output levels, one for all(prenominal) unattackable, which be such that after they are chosen neither steady, has an inducement to change its output level1. To easily understand the Cournot equilibrium, endure us consider a duopoly (a market consisting of two dissolutes). In most markets, the market cost is where supply is equal to demand. Therefore, the price menage 1 sets itself is strung-out on the bar supplied of steady 2. When firm 1 chooses the supply quantity, it assumes that the current quan tity firm 2 supplies are fixed. Costs can be prospect of a function of its stimulate quantity supplied, because costs of firm 1 are independent of whatever firm 2 supplies. In this market specifically, firm 1s re fulfills depend on the action of firm 2. A reaction function is used to evidence the optimum level of if the other firm changes their supply level.
presumptuous that each firm remuneration maximises, therefore the profit functions are: ?1 = (A-b(q1+q2)) * q1 - C(q1) Â Â Â Â Â Â Â Â ?2 = (A-b(q1+q2)) * q2 - C(q2) Firm 2 decides to supply cc units on the market; therefore firm 1s profit is dependan t on its own supply to the market: ?1 = (A-b! (q1+200)) * q1 - C(q1) It will then elicit where marginal cost is equal to marginal revenue to profit maximise. Suppose firm 2 increases the quantity supplied... If you want to get a full essay, order it on our website:
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