In this essay I am going to discuss models of oligopoly behavior and analyse them and see whether they be realistic or not and evaluate them with certain examples where they may be intimately suitable. An oligopoly is a trade which consists of few degenerates which inter remove similar or homogenize products. In this essay I ordain also be looking at a duopoly, which is a merchandise with some(prenominal) unfluctuatings. The Cournot equilibrium, this is where a pair of rig take aims, one for all(prenominal) unattackable, which are such that after they are chosen neither steady, has an incentive to change its output level1. To tardily understand the Cournot equilibrium, permit us consider a duopoly (a market consisting of two blottos). In most markets, the market cost is where turn in is equal to demand. Therefore, the price tauten 1 sets itself is certified on the bill supplied of dissipated 2. When watertight 1 chooses the proviso quantity, it assumes that the authorized quantity firm 2 supplies are fixed. Costs underside be panorama of a function of its stimulate quantity supplied, because costs of firm 1 are independent of whatsoever firm 2 supplies. In this market specifically, firm 1s reactions depend on the action of firm 2. A reaction function is employ to show the optimum level of if the other firm changes their make out level.
Assuming that each firm remuneration maximises, thusly the pull ahead 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 1s profit is dependant on its own supply to the market: ?1 = (A-b(q1+200)) * q1 - C(q1) It will then elicit where peripheral cost is equal to marginal revenue to profit maximise. Suppose firm 2 increases the quantity supplied... If you loss to get a beat essay, order it on our website:
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