Unformatted text preview: suppose there are two firms. These firms have the option to produce at Monopolistic output or Competitive output.
– The profit of each choice can be represented in a game (numbers here are just an example).
Nash Equilibrium = (Comp. Output, Comp. Output) Pareto Outcome = (Monop. Output, Monop. Ouput)
Firm 2’s Actions Firm 1’s Actions Monopoly Output
Competitive Monopoly Output Competitive Output 36, 36 30, 40 40, 30 32, 32 11
11 Cournot vs. Bertrand Oligopoly There exists two competing theories on how Oligopolies decide what price to charge and how much quantity to produce. – The difference between these two theories is the order in which they decide price and quantity. 12
12 Bertrand Oligopoly
Bertrand Oligopoly A Bertrand Oligopoly exists when firms choose the pri...
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