Basic Oligopoly Models

Basic Oligopoly Models - Basic Oligopoly Models 7.1 Explain...

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Basic Oligopoly Models 7.1 Explain the assumptions and main features of the four basic oligopoly models. Conditions for Oligopoly: Relatively few firms, usually less than 10. Duopoly - two firms Triopoly - three firms The products firms offer can be either differentiated or homogeneous. Role of Strategic Interdependence What you do affects the profits of your rivals? What your rival does affects your profits? An Example: You and another firm sell differentiated products How does the quantity demanded for your product change when you change your price? Key Insights: The effect of a price reduction on the quantity demanded of your product depends upon whether your rivals respond by cutting their prices too! The effect of a price increase on the quantity demanded of your product depends upon whether your rivals respond by raising their prices too! Strategic interdependence: You aren’t in complete control of your own destiny!
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Kinked-Demand Model -Developed by Paul Sweezy (Harvard) in 1939, Robert Hall and Charles Hitch (Oxford). -Few firms in the market
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This note was uploaded on 12/21/2011 for the course ECON 214 taught by Professor Bayemichael during the Spring '09 term at HKU.

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Basic Oligopoly Models - Basic Oligopoly Models 7.1 Explain...

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