Models of oligopoly behaviour, whether the respective assumptions are realistic and examples where different models might be the most appropriate.

In this essay I am going to converse models of oligopoly behaviour and analyse them and see whether they argon realistic or not and evaluate them with certain examples where they may be closely suitable. An oligopoly is a trade which consists of few degenerates which sell similar or homogenized products. In this essay I depart excessively be looking at a duopoly, which is a marketplace with both unfluctuatings. The Cournot equilibrium, this is where a pair of output levels, one for all(prenominal) unattackable, which argon such that after they are chosen neither steady, has an inducing to change its output level1. To easily understand the Cournot equilibrium, concede us consider a duopoly (a market consisting of two tightens). In most markets, the market cost is where supply is equal to demand. Therefore, the charge trusty 1 sets itself is pendant on the sum of money supplied of whole 2. When firm 1 chooses the supply quantity, it assumes that the current quantity firm 2 supplies are fixed. Costs can be opinion 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 action mechanisms depend on the action of firm 2. A reaction function is used to launch 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)         ?2 = (A-b(q1+q2)) * q2 - C(q2) Firm 2 decides to supply cc units on the market; therefore firm 1s profit i s dependant 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: OrderCustomPaper.com

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