Forexamplesupposetherearetwofirmsthesefirmshavethe

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Unformatted text preview: rofits but in the long run, their economic profit = 0. When looking at Oligopolies at a whole, this is the Nash solution. – Regardless of what the other firms do, each firm has an individual incentive to price low – However, this results in the lowest profits for the oligopoly as a whole. Actions for firms: Act Actions for firms: Act Independently However, when looking at society as a whole, Oligopolies who act independently maximize social welfare. If firms are acting like a competitive market, quantity supplied is high and price is low, and there exists no DWL; just like in a competitive market. 10 Nash Equilibrium and Pareto Optimum The decisions of an Oligopoly can be expressed in a game. – For example,...
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This document was uploaded on 03/23/2014.

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