oligopoly2-ho

oligopoly2-ho - Bertrand Stackelberg Cartels Oligopoly...

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Unformatted text preview: Bertrand Stackelberg Cartels Oligopoly (contd.) Chapter 27 February 11, 2010 Bertrand Stackelberg Cartels Oligopoly Considerations: Do firms compete on price or quantity? Do firms act sequentially (leader/followers) or simultaneously (equilibrium) Stackelberg models: quantity leadership Cournot equilibrium models: simultaneous choice quantity competition Bertrand equilibrium models: simultaneous choice price competition Bertrand Stackelberg Cartels Today Price competition (Bertrand duopoly) More quantity competition Stackelberg Duopoly Cartels/collusion Bertrand Stackelberg Cartels Bertrand Duopoly: price competition Firms compete on price No clear leader, follower so firms effectively choose p simultaneously Take the other firms price as given Market demand determines equilibrium output Both choose same price: divide demand evenly One sets lower price: that firm captures entire market Bertrand Stackelberg Cartels Bertrand Duopoly: price competition Suppose two firms have same MC What price to charge? Apply Nash equilibrium Each chooses optimal p i given p j No one has incentive to deviate If pricing above marginal cost, each has incentive to undercut...
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oligopoly2-ho - Bertrand Stackelberg Cartels Oligopoly...

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