Noncooperative oligopoly is a market where a small number of firms
act independently but are aware of each others actions.
Typical assumptions for oligopolistic markets. 1. Consumers are
- All firms produce homogeneous products.3.
- The Lagrangian multiplier from the cost minimization problem is
equal to marginal cost or the increase in cost from increasing the
targeted level of y in the constraint.
- Marginal cost is homogeneous of degree one in input prices.
Marginal cost is homo
Optimal use of inputs:
A firm uses engineering , agronomic , accounting, economic
and other principles in order to insure that it is on the
boundary of the output set. The optimal organization of
inputs is sometimes called technical efficiency.
Product form of the utility function, the cost function
and Hicksian demand functions. The cost and indirect
utility functions for the LES are usually obtained assuming
the direct utility function is a transformation
Two term polynomial demand systems and
A factor of production (input) is a product or service that is
employed in the production process. The factors of pro- duction used
by a firm fall into two general classes, those that are used up in the
production process and those that simply contribute
Output elasticity. We normally think of output elasticity in terms of
one output and many inputs so define it as follows.
- A profit maximizing firm will never produce in a region of the
production function with in- creasing returns to
Functional Structure and Functional Equations:
Functional structure is often related to the solution of functional
equations. Functional equations are equations in which the unknown
(or unknowns) are functions. Such functions can be multi-place in the
Unit of analysis and preferences. The fundamental unit of
analysis in economics is the economic agent. Typically this
agent is an individual consumer or a firm. The agent might
also be the manager of a public utility, the stockholders of a
Demand Cost and Indirect Utility Functions:
we determined that a system of demand equations satisfies
(ii) Homogeneity of degree zero in prices and income
(iii) Symmetry (iv) Negativity
A continuously differenti
Comparison of oligopoly with competition. In competition each
firm does not take into account the actions of other firms. In effect
they are playing a game against an impersonal market mechanism
that gives them a price that is independent of their own act
Technology Sets. The technology set for a given production process
is defined as
T = cfw_(x,y): xR , yR x can produce y
where x is a vector of inputs and y is a vector of outputs. The set
consists of those combinations of x and y such that y can be