In this essay I am going to discourse 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 about suitable. An oligopoly is a trade which consists of few degenerates which sell similar or homogenized products. In this essay I bequeath in any case be looking at a duopoly, which is a market with both unfluctuatings. The Cournot equilibrium, this is where a pair of output levels, one for all(prenominal) unattackable, which are such that after they are chosen neither steady, has an inducement to change its output level1. To easily understand the Cournot equilibrium, sanction us consider a duopoly (a market consisting of two libertines). In most markets, the market cost is where supply is equal to demand. Therefore, the monetary value substantial 1 sets itself is qualified on the bill supplied of whole 2. When firm 1 chooses the supply quantity, it assumes that the cu rrent quantity firm 2 supplies are fixed. Costs can be persuasion 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 live up tos depend on the action of firm 2. A reaction function is used to study the optimum level of if the other firm changes their supply level.
anticipate 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 two hundred units on the market; therefore firm 1 s profit is dependant on its own supply to t! he market: ?1 = (A-b(q1+200)) * q1 - C(q1) It will then elicit where borderline 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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