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*Qatar: biggest market share biggest markup higher profitsoUnderstand the implications of the equations****oTo solve explicitly:Maximize profitsBig Q = all firmsHave to take into account what my decision and what other firm’s decision isSeparate qimy firm from other firm sumDerive only qioReaction function: all firms identicalTake out my firm then (n-1)qI am reacting to what my opponent is doing and describe via reaction functionCournot DuopolyoSymmetric modeloBoth firms have same reactionTake other’s q as givenoNash equilibriumoStatic modeloThought processes as formulating strategyoAs firms react from opponent’s strategy converge to Cournot equilibriumoFirm 2 US vs. Firm 1 RussiaOutput of firm 2 went up at the cost of output of firm 1Bertrand Model
EnvironmentoOligopolyoIdentical productsoPrice control modeloBarriers to entryoMC pricing EquilibriumoPrice waroFirm 1 undercut firm 2 undercut firm 1 etc. P=MC price waroQ is a function of PWith DifferentiationoMax firm 1 by choosing price: TR -TCLimit PricingMonopoly: but not hurting consumers by lowering prices this prevents entryEntrant’s residual demand curveHow much entrant is gonna produce at PL? 0 because price is too high to make any profitsThe European Natural Gas MarketIn HW: Russian vs UkraineRussia cutting off gas supplies (comes by pipelines from Russia) need natural gas to heat/use other things US comes inNG in Europe owned by govt. (nationalized companies) production, transmission, distributionLecture 4/18/18Movement toward deregulation and liberalization regulations have been liftedoNatural gas and powerPower own the generatorNatural gas purchasing the natural gas needed for marketSupply: marketing; purchasing natural gasTransmission: transmitting; pipelineDistribution: businesses, households, customers etc.